Indian market rose 11 percent so far in the year 2017 and any further significant rally in benchmark indices looks unlikely at least in the next 12 months, but there will be a lot of stock specific action.
Considering the fact that the long-term bullish argument for Indian market still remains intact, investors should use dips to buy into quality stocks. Despite the various challenges in FY17, what favoured Indian equities was the domestic liquidity and continuation of reforms.
The outlook for Indian market remains promising as it is still one of the better investment destination among the emerging market space. But, the risk to reward ratio does not look relatively good after recent rally.
Most analysts are betting on earnings and economic recovery and companies in sectors which linked to India growth story should do well. A second consecutive year of favourable monsoon could also support earnings recovery next year.
The risk-reward is relatively unfavorable right now and there is very little error considering the fact that most stocks are back to pre-demonetisation highs, Sanjay Mookim, Director, India Equity Strategy at BofA ML said in an exclusive interview with CNBC-TV18.
There is very little room for an upside at the moment. In the best case scenario, Sensex could hover around 29,000 by December end, highlighted the BofA-ML report. “We advise investors to stay liquid at these prices and stay with large-cap growth sector. They should avoid adding risk at current levels,” said Mookim.
Going by the buzz on D-Street we have collated a list of top 5 stocks which can deliver up to 30 per cent return in the next 12 months based on strong fundamentals:
M&M: BUY| Target Rs 1,545| Upside 21%
Edelweiss Securities maintains a buy rating on M&M Ltd with a 12-month target price of Rs 1,545. M&M’s market share in its traditional products remains over 50 per cent, but it has not been able to participate in the new cross-over models. Hence, M&M’s overall market share is almost 30 per cent.
“We estimate M&M to post core EPS CAGR of 16 per cent over FY17-19, led by a recovery in rural demand and uptick in UVs with new launches,” said the report. At current market price, adjusting for subsidiary value, the stock trades at FY19E PER of 11x.
Skipper: BUY| Target Rs 210| Upside 20%
Bonanza Portfolio Ltd maintains a buy recommendation on Skipper Ltd with a 12-month target price of Rs 210. Skipper has a decent short- term order book of Rs 2,030 crore as on December 2016 and the management is eyeing some large orders win Q4 and Q1FY18 from Power Grid Corporation of India Limited (PGCIL).
The domestic brokerage firm believes that order traction from state transmission utilities can be the next trigger for growth for the Engineering Products segment and also larger private player’s participation in the transmission sector can add to Skipper’s customer profile.
KEC International: BUY| Target 245| Upside 27%
Edelweiss Securities maintains a buy rating on KEC International with a 12-month target price of Rs 245. Despite a strong rally of more than 50 per cent over the past 3 months Edelweiss recommend staying invested in the company.
It perceives scope of further 100bps margin improvement from FY17E level as margins of railways and solar businesses match T&D margin, which the Street is yet to factor.
And lastly, benefits from a reduction in working capital as a substantial amount of retention money gets released, which can reduce interest cost as a % of sales to 2.5 per cent from current 2.9 per cent, boosting profit.
Deccan Cements: BUY| Target Rs 1,450| Upside 32%
ICICI Securities recommends a buy rating on Deccan Cements with a fair value of Rs 1450. Deccan Cements (DCL) is a 30-year-old cement brand in South and has an installed capacity of 2.3 MT.
The company’s plant is located in Nalgonda (Telangana) and sells cement in Telangana, Andhra Pradesh, Tamil Nadu, Karnataka, and Maharashtra. Focus on high realisation markets and captive power plants have enabled DCL to register healthy margins.
“With the demand revival in the south, improving pricing scenario and operating leverage benefit, we expect sales and EBITDA to grow at a CAGR of 9.9% and 19.2%, respectively in FY17E-19E,” said the report.
Mahanagar Gas: BUY| Target Price Rs 1,055| Upside 18%
ICICI Securities maintains a buy rating on the stock with a 12-month target price of Rs 1,055. Mahanagar Gas (MGL) is one of India’s largest players in city gas distribution (CGD) business.
Expanding geographical reach, favourable pricing scenario and higher penetration of natural gas are expected to lead to 6.2 per cent CAGR in volumes in FY16-19E to 2.9 mmscmd in FY19E. Subsequently, revenues and PAT are expected to increase at a CAGR of 5.2 per cent and 15.3 per cent, respectively, over FY16-19E.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Special Thursday Expiry on
10th 7th Nov
Early Closure to The Great Diwali Discount. Last Chance to get Moneycontrol PRO for a year @ Rs. 289/- only
Coupon code: DIWALI
- Stocks rise after two days of heavy selling
- Adviser: Get out of stock index investing
- Swine flu spreads to Middle East, South Pacific; New Zealand reports 11 confirmed cases, Israel, one
- Edited Transcript of LEN earnings conference call or presentation 2-Oct-19 3:00pm GMT
Top 5 stocks which are a play on economic recovery and can give up to 30% returns have 941 words, post on www.moneycontrol.com at March 29, 2017. This is cached page on Business News. If you want remove this page, please contact us.