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Diwali Best Buys

Monday, October 28, 2013

The Markets are at a three year high, and as we approach ‘Samvat 2070’, the feeling is that this may be an auspicious beginning that every Indian investor is looking forward to. The current optimism in the markets has been fuelled, not just by positive global tidings, but also domestic macros getting much better. The good monsoons and better prospects of rabi crop are also expected to drive higher rural consumption and push up agricultural growth. In addition, double-digit export growth has turned out to be a much-needed silver lining for the economy with hopes of pushing GDP growth by a couple of percent. The INR has regained much of its lost ground and looks to consolidate at current levels and any announcement of the election schedule will further help maintain the trend. Mayura Shanbaug spoke to various market wizards to get that winning strategy for the coming year and bring you their recommended stock picks for this Diwali...

Clifton Desilva
Director, Altina Securities
Over the last five years or so the stock markets have been very volatile and huge swings have been witnessed based on news flows either negative or positive. Looking back, the Indian stock markets achieved a life time high on 8th January 2008 with the Sensex placed at 21,207 and the Nifty at 6357. The Sensex currently stands at 20,725 and the Nifty at 6164.

It now appears that stability is appearing in the markets. With the GD P touching a low of 4.4% in the first  quarter it appears that the Indian economy is bottoming out and going ahead the outlook appears more promising , albeit uncertainties on the US tapering, the outcome of the state and general elections.

It is very difficult to predict the markets on the whole over the next one year as there are a few uncertainties that can determine the direction of the market the outcome of which is not known now. But by and large it appears that the markets (indices) could record a gain of around 10% over the next one year.

However there are several stocks in the small cap and mid cap segment that have been beaten out of shape and once the economy turns around these stocks could generate a return of over 100% in a year’s time.

My Diwali Picks are...
Reliance Industries
These stocks should see a 20% gain over a 12 month time frame

CEO, Chart Pundit

The Nifty has had a brilliant run up over the last couple of months to come close to its all time high. Needless to say that a lot of resistance can be expected at higher levels and the current move is extremely liquidity driven and with impending elections on hand it would better to be slightly prudent in the current market scenario. Weakness in the currency is also something that one cannot ignore easily.

In the next one year / next Diwali I see the Nifty at 7000 and the Sensex at 24000

My Diwali Picks are...
Company              Target     
Reliance Ind.        1000
Tata Steel              400
Tata Power           120
Ab Nuvo                 1500
Bharti Airtel           400

Alok C. Churiwala
MD, Churiwala Securities Pvt Ltd

With the ghost of ‘Tapering’ behind us, at least momentarily, and on the back of decent results, the markets seem determined to test previous highs and move into a new uncharted zone. The current momentum seems strong. The INR has regained much of its lost ground and looks to consolidate at current levels and any announcement of the election schedule will further help maintain the trend, Inflation however continues to be a concern. The advances declines ratio has turned favourable and also the mid cap and micro cap stocks have started to show signs of life. However, investors would do well to steer clear of low quality stocks even if they look ‘inexpensive’.

With elections looming large, there remains a good chance that markets may break out into newer ranges in the coming Samvat 2070. I expect the Sensex to be in the range of 18000- 24000 upto Diwali 2014.

My Diwali Picks are...
Company           Target     
Reliance Ind.     1000
Tata Steel           400
Tata Power         120
Ab Nuvo              1500
Bharti Airtel         400

Waqar Naqvi
Chief Executive, Taurus Asset Management Co. Ltd.
We are positive on market outlook and specially optimistic  for FY 15 being a year of significant recovery. We expect Govt with fresh mandate and slew of policy measures that was initiated in FY 14 to impact positively Indian economy.

My Diwali Picks are...
By charter we are not allowed to talk about stock specifics.  We are positive on capex cycles, Oil and Gas and IT and BFSI sector. We are also positive on Mid cap companies due to stressed valuations.

We expect market to deliver upwards of 15% in next 18 months due re-rating  and earning recovery in FY 15

Vikram Dhawan
Director, Equentis Capital
The Markets appear to be ignoring the negative Macros like Slowing Economic Growth, High Inflation and Waning Investment Cycle. The probable Rationale is expectation of better than expected Earning Season, Strong Global Cues, Easy Monetary Policies to be maintained by leading Central Banks in North America and Europe and Peaking of Interest Rate Cycle in India. We have seen in past so many years that global liquidity or lack of it overshadows the Fundamentals and Technicals of Indian markets and there is no reason to expect otherwise this time as well. We expect the Market (Sensex) to be around 24,000 by next Diwali as we expect the Macros to improve significantly in the next few quarters and liquidity situation to improve.

My Diwali Picks are...
Cairn India
Reliance Industries
Indus Ind Bank
We are expecting 5-7% up-move in these stocks in the near-term

Dr. VK Vijayakumar
Investment Strategist, Geojit BNP Paribas Financial Services
The present buoyancy in the market is driven by liquidity. FII inflows are driving all Emerging Markets up. ETFs are attracting lot of money. The principal reason for this 'risk on' is the conviction that QE tapering will not happen soon. Capital inflows can take the market to an all time high very soon. The big risk in the present rally is that it is not supported by fundamentals. Reversal of inflows can wreck havoc. 

As regards the markets in the next one year / next Diwali; that depends on the outcome of the elections. If we succeed in getting a stable, reformist, market friendly government Nifty can cross 7000.

My Diwali Picks are...
Tata Motors
Bajaj Auto
HCL Tech
HDFC Bank.
We expect around 20 % appreciation in these stocks from their present levels.

Siddharth Rajpurohit
AVP, Equity Research, The Market Financial Intelligence
The optimism in the market that we have seen from the onset of September 2013 has taken significant momentum in October. The market is enthusiastic on a number of grounds such as significant improvement of the INR against the USD as the steps taken to curb huge gold import and attract foreign inflows bear fruit and also on the signs that US fed would defer its QE tapering decision to 2014. The strong run was further supported by metal counters that have posted a good revival as China the huge consumer and producer of base metals has shown signs of revival. Also the government has kept on fast track the clearances of a number of stuck infra projects. The better results has further acted as a support for the market. However, we believe that the currency is still not out of the woods and GDP growth to be in the range of 4.8 to 5.0% for FY14.

Also a number of structural issues in the Mining & Power sector are yet to be sorted out. With the significant curtailment on Gold the government would be able to achieve its targeted CAD of 3.7% of GDP but the targeted Fiscal Deficit number is a concern. Hence we remain cautious on the current upsurge in the markets and advice investors to keep their portfolio diversified across sectors in fundamentally strong companies. In the next one year, we expect in the near term market to move in a sustainable range of 6250 to 5550, but If the political scenario remains stable post election, we expect Nifty may see levels of 6600 to 6800 by next Diwali.

My Diwali Picks are...
Company                    Target     
Aurobindo Pharma    240     
Bajaj Auto                    2435     
Cairn India                  370     
GPIL                             133     
IRB Infra                       120     

Lalit Thakkar
MD – Institution, Angel Broking

In my view the optimism in the markets is fuelled not just by positive global tidings, but also domestic macros now looking much better. The postponement of Fed’s tapering by of QE3 by 3-6 months has provided our economy with a window for positive policy action to strengthen our resilience on the current account front and also comfort on its financing position. In addition, double-digit export growth has turned out to be a much-needed silver lining for the economy and I believe that given the 16% weightage of value added exports, at this run-rate we can potentially add about 150-200bps to GDP growth. Good monsoons and better prospects of rabi crop are also expected to drive higher rural consumption and push up agricultural growth. Eventually, as agri production increases I expect food inflation to ease considerably in turn providing headroom for interest rates to trend down again.

In my view, the benchmark indices finally look poised to cross their peaks and touch new highs. Aided by positive global developments and domestic catalysts we attribute a 15 times multiple to our Sensex EPS (in line with the 5-year average) and arrive at a Sensex target of 22,600 in the coming months. Beyond this, markets are likely to at least give returns in line with earnings growth which is expected to be about 13-15%.

My Diwali Picks are...
Company                      Target     
Wipro                              567
ICICI Bank                     1,181
Axis Bank                       1,392
Cipla                                390
United Phosphorous    225

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