NEW DELHI: Investors have lost close to Rs 9 lakh crore in market capitalisation on the BSE so far in January weighed down by a crash in crude oil prices, China jitters, a slowdown in global economic growth and muted earnings.
Investors can still take shelter in those stocks and sectors which have a stable track record of growth, promising earnings outlook, efficient management, less impacted by global factors, are not highly leverage and are trading at attractive valuations.
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“We try to strike a good balance between value and growth. What we are saying is that we are not going to be investing in value if we do not see any sign of growth. We are not going to be investing in expensive stocks even if there is growth, if it is not justified by the right kind of valuations,” Manish Kumar, CIO, ICICI Prudential, said in an interview with ET Now.
Here is a list of recommendations from various experts on stocks and sectors, where investors can look for earnings visibility:
Analyst: Avinnash Gorakssakar, CIO and Head Research, Precision Investment
Theme: Private banks & selective PSU lenders
Our vision for investing is slightly longer term, considering the fact that we are already down to pre-Modi wave levels when the market was at an euphoric high. Clearly, there is good value, if one has the conviction on a particular stock, where the earnings story or the overall demand outlook remains promising in the current scenario.
“It is not the end of the road, but obviously one has to be patient and clearly there is good value to be picked up,” said Gorakssakar.
1. Private Banks: Axis Bank, IndusInd Bank.
From the private banking space, Gorakssakar likes IndusInd BankBSE 1.00 % and Axis Bank.
The management commentary of Axis BankBSE -0.97 % was extremely sound. The market
was clearly relieved by the fact that in terms of the additional asset providing as per the RBI norms, the management has done a good job by actually putting it on the table upfront. Going forward, the stress on asset quality is going to be limited.
As for IndusInd Bank, it has reported a set of stable numbers showing 20-22 per cent growth and, more importantly, they would be riding comfortably on the CV cycle, which still appears to be very strong.
2. PSU banks: SBI.
On the PSU side, a contra bet would be something like SBI. The only hangover could be that it has again asked for shareholder approvals for Rs 15,000 crore kind of offering. In the near term, the stock may appear a little weak, but if you see the past two quarters, asset quality has improved marginally.
Clearly, at some point of time this is a bank which represents India. So obviously, once a macro recovery comes in, you cannot write off a bank like SBI. At these levels clearly, if you have got a longer-term horizon, say about two years, SBI could be a good value pick.
3. Housing Finance Companies: Repco Housing Finance, LICHFL.
“We are looking at putting telling our clients to be invested in the housing finance space. We believe that even in the coming budget this is one area where possibly the government would focus on affordable housing in a big way,” said Gorakssakar.
In fact, the government has put this as a focus area and in this space we like stocks like Repco Housing Finance something like a Dewan Housing Finance (DHFC) which also reported numbers this week. They have a very strong loan book growth of almost 21-22 per cent, 16 per cent bottom line growth and very stable asset quality.
By size of the balance sheet, it (DHFC) is third largest housing finance company and trades at below one-time FY17 book value. There are good value and risk reward available at the current price. “We believe that clearly a price of around 260-270 looks possible over the next 12 months,” Gorakssakar said.
Analyst: Saurabh Mukherjea, CEO, Institutional Equities, Ambit Capital.
4. Theme: Urban consumption: Asian Paints, TVS Motors.
If there ever was a year in India to focus on top quality franchises, this is the year. It will be very difficult for the second rung, third rung companies to deliver in a year like this. “We need outstanding management teams to be able to keep their act together. Asian Paints certainly is one,” said Mukherjea.
It is expensive but under the present circumstances, the only gleam of positivity in the country is urban India and Asian Paints caters to it, he said.
“The other company which plays to that theme is TVS Motors — whether it is the impending BMW bike launch or the upgraded Victor launch. TVS Motors is another company which make sense. It is a well-run company with a strong balance sheet,” he said.
Analyst: Dipen Shah, Senior VP & Head, PCG Research, Kotak Securities,
5. Theme: Cyclicals: Rossell India, L&T, BEL, Ashok LeylandBSE 0.93 % etc.
Various segments within the economy are doing well, for example, the sectors which are going to be impacted by government spending will possess earning growth in near future. “I think they have seen the significant amount of spending coming across sectors like roads, railways and defence and this a segment which we should look at,” Shah said.