Stock selection is the key as liquidity from foreign investors have pushed many small & mid-caps names higher
The S&P BSE Sensex has already rallied over 2,000 points so far in March while Nifty has seen a fierce up move of 634 points, and both indices are on track to surpass their respective highs in near future.
The S&P BSE Sensex is just 2.5 percent away from its record high of 38,989 hit on August 29, 2018, while Nifty50 is just 2.9 percent away from its record high of 11,760 registered on August 28, 2018.
Nifty Bank has been leading the rally and history suggests Nifty follows suit whenever there is a breakout. Nifty Bank hit a record high of 29,812 on Monday. It has already rallied 2,592 points, as of closing on March 15.
Experts feel that long-term investors should buy into this market on dips as the upside is still intact and it looks like we are on our way to hit fresh record highs.
However, stock selection is key as liquidity inflow from foreign investors has pushed many small & midcap names higher. In a matter of weeks, they have recorded double-digit returns outperforming largecaps in the same period.
Ahead of the elections, foreign investors have developed an appetite for Indian equities. FIIs bought equities in Indian market worth over Rs 30,000 crore so far in 2019.
“We can safely say that what we are seeing is a massive catch-up rally. We are in the middle of a massive global bull market that is fuelling liquidity, and India is catching up,” said Atul Suri, CEO-PMS at Marathon Trends in an interview with CNBC-TV18.
Commenting on the Nifty, he said that we are on track to hit lifetime highs around 12,000 level. However, he sees rising crude oil prices as the “dark cloud” for the market.
Atish Matlawala of SSJ Finance & Securities, told Moneycontrol that both Sensex and Nifty are currently trading at their six months highs and are moving towards an all-time high level of 38,985 and 11,751, respectively.
“From there, we can see upside rally which can breach Sensex and Nifty lifetime highs. Assuming we have a stable government at the Centre, by the end of 2019, we see Sensex and Nifty at 41,000 and 12,100 levels respectively,” he said.
The best strategy in the current market for investors would be to start accumulating good quality large as well as mid-cap stocks from a medium to a long-term perspective.
Moneycontrol spoke to two fundamental experts and here’s what they have to recommend for a minimum time horizon of one year. All these stocks have seen some correction in the past and are available at fairly attractive valuations:
Analyst: Vipin Khare- Director of Research, William O’Neil India
The company delivered better than expected performance in the recent quarter with superior efficiency in its oil refinery business and at the same time showing growth in its retail, as well as telecom (Jio) segment.
It plans to tap into the domestic retail market through both online and offline channels backed by the strong infrastructure of Jio. Technically, it has held itself above key moving averages during the sell-off in the markets.
Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
It is likely to benefit from increased opportunities in the generic space caused by the supply disruption from China. It has announced capex plans of Rs 12,000 crore for the two brown field projects which are expected to be completed by the end of 2019.
Technical set up for the stock looks good as it has surpassed its 21-DMA. The stock has outperformed the benchmark indices and has a strong up-trending Relative Strength (RS) line in a weak market.
With better than estimated Q3 FY2019 results, the company has continued with its strong revenue and EPS growth.
The stock is forming a tight area in a weak market and has maintained its strong price-strength. It trades constructively above its key moving averages amid non-rallying market.
Given the recent resilient performance by the IT sector, this is a technically good stock to keep in one’s portfolio. Technically, the stock has outperformed the benchmark indices during recent sell-off and has only moved sideways when Nifty50 was in a selling spree during recent few sessions, showing the improving relative strength. Post the buyback announcement, the stock has also seen accumulation in recent sessions.
This is a stock to keep on the watch list for investors. Cement sector has shown strength in recent sessions.
With improved IIP data in recent periods, the revival of the construction sector, GST relief to real estate sector, cement companies are likely to benefit from the impending demand push.
The stock has retaken its 50-DMA amid recent accumulation. It’ll be actionable if it continues to show technical strength and retakes its 200-DMA.
Analyst: Vinod Nair, head of research at Geojit Financial Services
BEL’s current order backlog is Rs 48,000 crore (5x FY18 sales) provides strong visibility for the next three years. 9MFY19 order inflow was up by 145 percent to Rs 16,500 crore.
Given BEL’s niche technological and execution capabilities, improved order inflow outlook and GoI focus on indigenous procurement, we remain positive on BEL.
Currently, BEL is trading at a 1-year forward P/E of 11.7x, which is a 38 percent discount to its 5-year average of 19x. It seems an attractive bet given strong order book visibility.
EIL is focusing on cost control initiatives and technological up-gradation as strategies will improve the market share from the unorganised sectors.
We expect the demand scenario for 2W to remain strong for FY20 led by increased rural income, higher MSP and new product launches by OEMs.
EIL will be the direct beneficiary as it has 86 percent market share in two-wheelers. We remain positive on the long term outlook of EIL, owing to higher acceptance of battery engineering.
We value EIL at 15x FY21EPS (20 percent discount to its historical average) and insurance business at 2x FY18 EV (embedded value).
AFL has recently completed its major capacity expansions in both Feeds (1,75,000MT-40 percent of existing capacity) and Processing (15,000MT- 200 percent of existing capacity) segments that will support future growth.
AFL has a strong track record of growing above industry growth in the last five years. In FY18, it witnessed an unusual margin gain of 750bps which is unlikely to sustain due to subsequent correction in shrimp and RM prices and demand slowdown in the US.
We expect PAT to de-grow in FY19E but to normalize post FY19E. AFL is diversifying shrimp exports to Europe and China and is planning feed export to other countries which will support revenue growth.
AFL is currently trading at 11x 1Yr Fwd P/E which is at 49 percent discount to its 2-year average.
In Q3FY19, the net interest income (NII) grew at a modest pace of 8 percent on a YoY basis, with NIM at 3.3 percent and net profit increased 21 percent YoY on the back of zero provision cost.
We expect net profit to increase at a CAGR of 16 percent over FY18-21E led by healthy growth in loan book along with lower provisioning expenses.
We continue to remain positive on the stock on the back of healthy asset quality, a well-balanced borrowing profile and consistent management focus.
Going forward, we expect the company to generate RoA of ~2 percent and RoE of 20 percent over FY18-21E. Currently, the company is trading at 1-year forward P/B of 1.8x, which is at 36 percent discount to its 5-year average of 2.8x.
The company reported a robust revenue growth of 54 percent YoY to Rs 727 crore in Q3FY19 led by strong execution of big-ticket orders.
While 9MFY19 revenue growth remains strong at 86 percent YoY to Rs 2,021 crore, PNC has received financial closure for all seven projects and four of these projects achieved appointed date and execution is currently in progress.
Order book remains robust at Rs 12,478 crore, which is 4.5x TTM revenue that provides improved visibility in the coming years. Execution is likely to smoothen going forward as the majority of its project’s construction has started.
Additionally, Nagpur– Mumbai expressway EPC project (Rs 2,000 crore) received the appointed date and project is currently under construction.
The benefit of higher execution and operational efficiency will stimulate earnings to grow at a CAGR of 27 percent over FY18-21E. Currently, the PNC is trading at 1-year forward P/E of 12x, which is at 32 percent discount to its 5-year average.
Disclaimer:-The views and investment tips expressed by investment experts are their own. Ripples Advisory advises users to check with certified experts before taking any investment decisions.
Indian Stock Market- Get profitable Equity Service, MCX, HNI & Currency Services with good call accuracy. BSE Sensex & Nifty50. Our market researchers track the share positions and give best call accuracy to customers.