Nifty corrected more than 1,000 points in the last two-and-half-months from its record high, dented by the economic slowdown, liquidity crisis, dismal earnings performance and global trade tensions.
The broader market was also hit hard with the Nifty Midcap index tanking nearly 13 percent and Smallcap index plunging nearly 17 percent in the same time period.
Worryingly, experts are not upbeat about the future either. They expect the coming year to be challenging.
"Considering the current domestic economic slowdown and rising fears of global economic issues, we believe the next one year would be challenging for Indian markets. Moreover, the valuation still continues to remain elevated and with growth slowing, a valuation correction cannot be ruled out," Ajit Mishra, Vice President, Research, Religare Broking said.
Umesh Mehta, Head of Research, Samco Securities said the first year of any government is generally turbulent and it may not really bring cheer to the stock market.
"The structural policies generally affect large businesses, at the same time help small and medium enterprises that may impact listed companies' earnings. However, the big worry is global factors that will drive the stock market returns for the next year. Globally, the environment is risk-averse and equities may not deliver returns. The same trend is likely to be followed in India too," he added.
He feels at best markets will continue to oscillate at this level. Investors should invest around 10,000-10,100 on the Nifty and refrain from bottom fishing at current levels, Mehta advised.
"In such a scenario, it would be a prudent approach to maintain the bottom-up approach and sticking with quality companies with sound fundamentals, strong corporate governance and healthy growth prospects," Ajit Mishra said.
Here are 15 stock picks that could return 11-44 percent in the next one year:
Gaurav Garg, Head of Research, CapitalVia Global Research Limited
Reliance Industries | Target: Rs 1,840 | Return: 44 percent
The core attribute of the company is diversification. Refining, petrochemicals, oil and gas, organized retail, telecom are the segment that the company deals in.
The company stands out with sound financials with the retail and telecom sector acting as the prime tailwinds for escalating growth. The telecom arm has become the market leader in a short span with a high customer base reaching to 340 million subscribers.
The company also intends to be a debt-free by March 2021. With strong valuations, we recommend buying Reliance Industries with a target price of Rs 1,840 with a long-term horizon.
ACC | Target: Rs 1,760 | Return: 11 percent
The company will be able to see high margins in the coming years due to the increase in the share of the company’s value-added goods in its revenue. The infrastructure sector with high budgetary allocations, up-gradation of roads and Housing For All scheme will drive cement demand.
Robust demand, attractive opportunities and long-term potential are factors for fostering the growth of the cement industry. It is expected that the cement sector will continue to be in an upswing. The company’s valuations seem attractive. We recommend buying ACC with a target price of Rs 1,760 representing a potential upside.
Bata India | Target: Rs 1,690 | Return: 15 percent
Rising sales and profitability makes the company attractive. The innovative campaigns have helped the company in sustaining growth and profitability. The retail channel continues to expand at a steady pace contributed by growth in e-commerce and non-retail channel.
With a futuristic view, the company focuses on product innovation that along with technology can be helpful in fostering growth. We recommend buying stock with a target price of Rs 1,690.
Dabur India | Target: Rs 530 | Return: 24 percent
Dabur India drives optimism through product innovation, e-commerce and its keen focus on naturals and Ayurveda. The company has reported a growth in net profit in the previous quarter. The growth of the company is contributed by domestic as well as its international business.
We recommend buying Dabur India with a target price of Rs 530.
UltraTech Cement | Target: Rs 5,150 | Return: 22 percent
UltraTech Cement has reported an upswing in profits backed by a better realization and lower operational cost. We remain positive on the company’s valuations combined with the growth in the cement industry, we recommend buying UltraTech Cement with a target price of Rs 5,150.
Prashanth Tapse, AVP Research, Mehta Equities
HDFC Standard Life | Target: Rs 630+ | Return: 30 percent
Considering the optimal scale of operations, efficient use of distribution channels (banking support), healthy persistency ratios and higher new business mix from the protection business drives future growth for the company.
Investors looking for high-quality business visibility with consistent earnings growth, HDFC Life offer the best-in-class investment opportunity to buy at the current levels.
ITC | Target: Rs 310+ | Return: 26 percent
We like ITC with a clear long-term horizon as it is consciously reducing its dependence on the cigarettes business and effectively pumping the cash generated by the cigarettes business in the fast-growing businesses like FMCG, Agri and hospitality.
We believe FMCG, Agri and hospitality reinforce our confidence of double-digit growth visibility over the next 3-5 years. Considering strong operating cash flows, continuous capacity expansions across businesses and a healthy balance sheet, we continue to have an optimistic view on ITC.
L&T Finance Holdings | Target: Rs 130+ | Return: 26 percent
We like L&T Finance due to its diversified business profile in the financial services space operating in rural, housing and wholesale finance and asset management businesses.
L&T Finance is focusing on sectors such as renewable, transportation and transmission in the wholesale segment, which is relatively less risky, the full benefit of this would only be visible over the medium term. Considering L&T’s parentage support, healthy asset quality mix and adequate profitability profile, we prefer to go long on L&T Finance for medium to long term.
IDFC First Bank | Target: Rs 58 | Return: 35 percent
IDFC First bank's loan book with retail loan mix will likely increase to 50 percent in the next three years and 70 percent in 5-6 years from the current 35 percent will deliver better yield going forward. We believe ROE to improve from current 3-4 percent to 7-8 percent in the medium term on the back of higher operating leverage and improving NIM and fee-based income. Hence, we like to add it for medium-term investment.
Zee Entertainment Enterprises | Target: Rs 440+ | Return: 31 percent
Considering the association with the largest producers and content aggregators with 1.3 billion viewers across more than 170 countries, we stand optimistic about business visibility. With respect to its recent development towards strategic stake sale which is to be anyhow completed on or before Sept 2019, we see the confidence in the promoter capability to execute stake sale strategically at good valuation before the deadline.
Zee remains structurally sound and offers a great opportunity for meaningful growth over the years to come.
Amit Gupta Co-Founder and CEO TradingBells
Sun Pharmaceutical Industries | Target: Rs 540 | Return: 30 percent
The global pharmaceutical industry is at crossroads with increasing pressure from the governments and regulators over escalating drug prices. The industry, in general, has bottomed led by Sun Pharma which is currently trading at levels that is 40 percent off its 52-week high of Rs 679 witnessed in September 2018.
The company is focusing on exports and R&D as it has become imperative to innovate in order to survive for the long-term in pharma business. This company can be a good bet for the investors in the long term especially at the current levels.
Bharti Airtel | Target: Rs 500 | Return: 38 percent
Despite tough competition in the telecommunications industry, Airtel is one company that has managed to stay strong. They have focused on increasing their ARPU by measures such as the introduction of minimum commitment plans, focus on digital innovations and offering differentiated services to its premium customers. Airtel stock is currently trading at Rs 355, and once it manages to break its 52-week high of Rs 378, we can see the stock scale to new highs even approaching its all-time high Rs 500.
Kotak Mahindra Bank | Target: Rs 2,000 | Return: 33 percent
Kotak Bank's main focus historically has been on maintaining good asset quality and controlling its NPAs. Its risk-weighted assets as a percentage of total assets have continuously declined and the bank currently enjoys industry-low NPAs. The stock has consistently delivered positive returns since October last year and is trading near its 52-week high of Rs 1,555.
With the financial sector witnessing major liquidity crisis currently, Kotak Bank can be one name that stands out in this sector in the coming year.
Bajaj Auto | Target: Rs 3,300 | 20 percent
Bajaj has grown its domestic share in the motorcycles segments to over 20 percent recently, driven by its strategy of well-styled appealing products at the most affordable pricing.
The slowdown in the two-wheeler market is mainly coming from the smaller motorbikes, which has not been Bajaj's focus, and hence they are not affected by it too much. The stock has remain rangebound in the past few years and is currently priced close to its 52-week low of Rs 2,400, and we see it bouncing back to at least Rs 3,300 very soon.
ICICI Prudential Life Insurance Company | Target: Rs 500 | Return: 28 percent
Insurance cover in India remains very low at 8 percent and the life insurance penetration in the country is also low at 2.76 percent of the GDP versus the global average of 3.33 percent. With the growing workforce of the country and higher disposable income coupled with increased financial awareness, the insurance sector in general and life insurance, in particular, should witness higher than usual growth in the coming time.
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