In India normally we consider investment cycle from election to election, as sectorial equation get changes from election to election as govt changes it impact policies, consumption demand and mainly investor sentiment. As exit polls suggest current NDA govt can retain in centre it can be boost for Private Banks, NBFCs, Consumer based stocks. We have seen 2 upper circuits in 2009 as UPA was retaining govt so same can happen this time as market is expecting NDA will retain govt so this is right time to accumulate quality stocks before jump comes into it (Buy in tranches so there will very less impact of any volatility).
Elections can impact your portfolio temporarily impacting your virtual returns but in a longer time frame it’s only your portfolio which can either outperform or underperform because of earning growth of stocks. So we have designed a focused diversified portfolio which can be triple from here till next Loksabha Elections.
CMP 86.50 (H 152/L 77.60)
Reason: ROE (Return On Equity) is much better than its peers. Whole auto sector is in crunch due to BSVI compliance where Ashok Leyland already tied up with Sun Mobility for EVs. Ashok Leyland is inviting Tesla for partnership to launch EVs in India this will be fortune changing for Ashok Leyland. Stock is 48% down from recent high this makes Ashok Leyland more attractive.
L&T Fin Holding
CMP 122 (H 189.50/L 110.65)
Reason: Stock at P/E of 11 and P/B 1.79, Stock is trading at very cheap valuations compare to all NBFCs. In difficult times of liquidity crunchL&T Finance Holdings net profit more than doubled during the quarter ended March 2019. Company is showing significant growth since last few quarters.
HDFC Standard Life
CMP 398 (H 510/L 344)
Reason: Market Leader in Life Insurance Business. ROE is much better than other market participants. HDFC Life delivered a stable performance reported a 24 percent YoY growth in total premium as new business premium grew 32 percent. India has a high protection deficit among key Asian countries at 92 percent, according to 2014 estimates by Swiss Re. This implies that for every $100 required for protection, only $8 is spent by a typical Indian household, leaving a massive mortality protection gap. This represents a huge opportunity. MODI govt is very serious about insurance as they have started schemes like Ayushmand Bharat, Pradhanmantri Bima Yojna this will benefit the company.
CMP 196 (H 259/L 182)
Reason: PE 12.9 One of the cheapest quality stock in current market. China Capped Aluminium manufacturing activity So biggest beneficiary. Strong demand outlook in US and stable demand in Europe/South America/Asia, aided by quality operations and sound B/S sets firm outlook for Novelis (Subsidiary of Hindalco). Backed by strong business model and attractive valuations, we maintain buy on Hindalco.
Oil & Gas
CMP 302 (H 329/L215)
Reason: Govt is planning shift vehicles from traditional Fuels to CNG & Electric vehicles. Moving to CNG is much easier than Electric Vehicles as infrastructure is much developed than Electric so govt is promoting CNG. Operating Margins are very attractive.Fuelling the largest CNG Bus fleet in the world. Today IGL has its operations in NCT of Delhi, Noida, Greater Noida, Ghaziabad and Rewari with 463 CNG stations, 10.29 lacs residential consumers and 4100 industrial/ commercial consumers. Govt is planning to allot more city distribution licences in coming time IGL will be beneficiary.
CMP 153 (H 177/L 105)
Reason: Stock at P/E of 8.5 and P/B 1.27 EPS improved to Rs.6.36 from Rs.5.83, stock is trading at attractive levels. Government wants to move to alternative fuel system so IOC is aggressively tendering to start Bio CNG and Bio Diesel throughout India and this will be game changing move for IOC as this fuel will cost less compared to traditional fuel and margins are also very attractive. Refining & Retail penetration of IOC is much higher than any other company.
CMP 1339 (H 1417/L 906)
Reason: Reliance Industries became countries biggest company by revenue, It is also the most profitable company in the country with a net profit. Company operates diversified businesses such as petroleum, petrochemical, telecom, retail, and digital services vastly expanded its business, clocked a net profit of Rs 39,588 crore in FY19. With this milestone, Reliance has achieved the number one position in terms of all three parameters — revenue, profit, and market capitalisation. With strong refining margin and robust retail business, Reliance clocked a 44 per cent in revenue in FY19 over the previous year and posted a compounded annual growth rate of over 14 per cent between FY10 and FY19. Interestingly, Reliance which boasts of the highest cash reserves of Rs 1.33 lakh crore on the books, so company is utilising its higher customer base and entering into new businesses. Jamnagar Refinary will get operated in FY2019 this will be very big trigger for company.
Electronics & Electricals
CMP 750 (H 783/L 514)
Reason: Company is aggressively acquiring new businesses. Company added 2-3 new brands in its portfolios. Havells acquired Lloyd and entered into white goods business which is highest margin business. Favourable revenue base along with a strong consumer demand across all its business verticals drove the overall topline growth. Havells has a network of 7,500 distributors which services 100,000 retail touch points. The company aims to further expand penetration into tier-2 and 3 markets through 10-15 percent expansion in the distribution network. Over the past couple of years, Havells has gained a strong foothold in the sector with the launch of new products and gain in market share across segments. The company seems well positioned to benefit from an expanding distribution network and increased brand visibility. The demand for EVs could bring in volume uptick for Havells as one critical component in EV is an electric wire harness. Compared to a conventional ICE vehicle, the requirement of the wire harness, supplied by auto component makers, is 3x in EV.
CMP 1760 (H 1869/L 1477)
Reason: Company is biggest beneficiary of GST Implementation. Now sector moved from informal to formal and as biggest player of the sector Volumes & Margins are improving.Discretionary consumption would bounce back if the monsoon is normal, liquidity situation eases, PM Kisan Yojana and stable government is in place. HUL is likely to benefit from the expected rise in the government’s rural expenditure (farm loan waver, rural schemes and double income of farmers till 2022). Company will get benefited in near term through GSK acquisition. While volume growth moderated in line with sectoral trends, the company’s outperformance versus peers merits attention.
CMP 709 (H 773/L 585)
Reason: Price/Book 4.77, P/E 20.15 Cheapest among the IT Sector. After removal of Vishal Sikka from system corporate governance issue has been solved and new & dynamic management is focused on Growth. They have invested heavily on man & technology which will impact in near term. Performance wise Infosys is better than TCS but due to heavy investment on Employee & Technology it impacted on margins and it gave visibility to TCS. But this upgradation will start benefitting company in coming time.
Larsen & Turbo (L&T)
CMP 1449 (H 1462/L 1182)
Reason: This is among top Blue-chip stock and which is not participated in Bull Run so valuations are still very attractive. As Crude is going up Gulf economies are getting strong and major business of company comes from GULF. Company currently have strong order book of 3 lac crore. NDA govts primary focus is on improvement of infrastructure so this company will get benefitted of infrastructure expenditure. L&T has reported a growth of 24.2% in its consolidated revenues. The growth in revenues was driven primarily by better execution in Infrastructure segment, persistent growth in Hydrocarbon segment, Realty segment and services business.
CMP 400 (H 414/L 256)
Reason: Highly beaten Stock and stock is came out of multiyear consolidation. Banks major NPAs are metal companies and govt is working very hard for revival of metal sector so as NPAs get recovered ICICI will get benefited. Private Sector Banks became 2-3X in this economic cycle, ICICI Bank is still 1X so big value unlocking will happen. Management Change will be Trigger for Banks Growth. Improvement in loan book and sufficient liquidity at cheap valuation makes ICICI Bank attractive as compare to other private banks. ICICI Banks CASA of 3,25,000 Cr is a good as of HDFC Bank’s CASA 3,25,000 Cr in value term and even better in percentage term 46% compared to 40% of HDFC Bank. ICICI Bank is still trading at 1.5 times forward book on core standalone banking operations as compare to 4.0 times of HDFC Bank so ICICI Bank have huge value left which we can see in coming times, it makes ICICI Bank proffered pick in private sector bank.
Jubilant Food Works
CMP 1285 (H 1578/L 795)
Reason: Dynamic Management and Fast Growing Company. Aggressively adding outlets and new product development will make this stock multibagger stock. Stock Corrected 20% from highs. Stock is biggest beneficiary of Society Modernisation in Urban Area. 30 Mins home delivery model makes it very unique and as they are aggressively growing stores networks this will reduce their delivery time and it will increase their popularity and volumes. Companies recent tie up with Indian Railway for onboard delivery service is benefitting the company as there is less competition in that space. Innovative product development makes company more stronger day by day, stock can be 5-7X from here.
CMP 1369 (H 1529/L 1118)
Reason: Asian Paints hold major market share in paint industry in India. Promoter holds more than 50% holding (unpledged) and ROCE of stocks is more than 25% makes stock attractive in terms of capital appreciation. In last decade irrespective of Market conditions every year stock made new high. Asian Paint is biggest beneficiary of PM Modi’s Scheme of Housing for all, PMAY and Swatch Bharat Abhiyan. Companies premium decorative paint business is increasing since last couple of quarters which adds more value to business. Asian Paint is growing more than 18% CAGR since last couple of years, stock created wealth creation in real terms expecting the same in coming time too.