Fundamentally sound stocks generally perform better in these troubled times. 5 good Sensex stocks are picked for those who prefer to invest in index large cap stocks. Long term investors should accumulate these stocks to get 60-80% returns in one year. Keep some cash to accumulate more on any unexpected fall.
5 best Sensex stocks for long term investment horizon:
1. Larsen and Toubro (L&T):
This is the best stock in Sensex for long term investors. L&T surprised analysts with their better than expected results. But stock still underperformed to bad market sentiment. As L&T entered into niche areas, margins will improve in the coming quarters. Upcoming demergers will improve L&T valuations in the coming quarters. Huge order book is another plus point. Announcement of bonus is a near term trigger after current turmoil.
CMP: 2,564. EPS: 74.3 P/E: 34.5
Expected EPS for FY2009: 105-110.
Ideal entry price: 2,350-2,400.
1 Year target: 3,600-3,800.
Best investment duration: 3 years to get wonderful returns from this giant.
2. ICICI Bank:
Real strength of ICICI Bank lies in their subsidiaries. ICICI securities IPO is a near term trigger.
CMP: 733. EPS: 37.3 P/E: 19.6
Expected EPS for FY09: 48-52.
Ideal entry price: 660-680.
1 year target: 1150-1,250.
3. State Bank of India (SBI):
Attractive valuations but unpredictable government interference.
CMP: 1,249. EPS: 106 P/E: 11.7
Expected EPS: 135-140.
Ideal entry price: 1050-1100.
1 year target: 2,000-2,200.
Best investment duration: 18-24 months.
4. Reliance Communications:
Another "Must buy" stock for long term investors if they don't overly paid for acquisitions. Reliance Infratel IPO is a short term trigger.
CMP: 491.6 EPS: 12.5 P/E: 39.2
Expected EPS for FY09: 25-28.
Ideal entry price: 470-480.
1 year target: 750-800.
5. Reliance Industries:
This stock holds enormous intrinsic value. Reliance will give good returns for patient shareholders who invested for long term. Kakinada gas will change fortunes of shareholders in short term. Invest in Reliance; believe in Ambani; forget about it.
CMP: 2,100 EPS: 138 P/E: 16
Ideal entry price: 1,800-1,900.
1 year target: 3,000-3,200.
Duration: Invest for 2-3 year to get complete benefits.
Infosys, Bharti Airtel and Grasim are good stocks to get safe moderate returns in these difficult times. Fortunes of DLF and M&M will depend on inflation. Recent salary hikes may hit the balance sheets of companies like BHEL. Tata Steel is best underdog stock for FY09. We will get more clarity on these stocks in the next quarter results.
India's fastest growing Companies:
A. Large Companies (sales of more than Rs 2,500 crore):
1. Videocon Industries: Dhoots are making strategic moves. Company paid higher advanced tax in September. When will this sleeping giant wake up in stock markets?
2. Bharti Airtel: Consistent performance but don't expect fireworks.
8. Sesa Goa: Slow down in China is a bad news over short term.
9. Thermax: Good performer.
15. HDFC Bank
20. NMDC Limited
B. Medium Companies (Sales of Rs 600 crore- 2,500 crore): Many of these companies are operating in niche space and strategically diversifying into emerging sectors.
5. ICSA India Limited: Steep correction due to FII selling.
9. Shriram EPC Limited: very good results.
12. Electrotherm: Largest electric vehicle maker.
13. Rohit Ferro-tech:
23. Subhash Projects and Management: Good long term play.
C. Small Companies (Sales less than Rs 600 crore): Many of these small caps have the ability to become mid caps and large caps over the next 3-5 years. Don't give too much importance to recent price correction. These shares are strictly meant for patient long term investors.
14. MIC Electronics
15. Tanla Solutions
20. Geodesic Information
21. Bartronics India
22. OnMobile Global
Note: These companies were selected by the magazine basing on their sales growth over the past 5 years. But past performance is not a guarantee for future performance. Rising costs, global meltdown and real estate crisis may affect the performance of some of the companies in the list. But it provides good insights over the performance of some of the best Indian companies.
Request to readers: Some readers are mailing me with ordinary requests like "what is stock market?" and innocent questions like "how to invest in stock markets?" etc. It is difficult to answer to these vague questions through blog or mail.
Significant news:
1. RBI cut CRR by 50 basis points to increase liquidity in the system. Although RBI stated it as a temporary measure, it is an aggressive timely measure by Reserve Bank of India. Interest rate sensitive stocks will react positively to this news.
2. SEBI removed restrictions on P-notes. This will have significant impact on the FII investments. Indian markets may react positively to these liquidity and sentiment boosting decisions. These steps may take BSE Sensex to above 13,000 levels if global conditions will not affect Indian markets. But global economic situation is gradually deteriorating from bad to worse.
Must read: Wonderful article on legendary acts of Warren Buffett and J.P. Morgan during extreme financial crisis. Buffett will be remembered forever for his daring acts like Morgan.
Financial note: Derivatives were invented as hedging instruments but many traders are using them as investment vehicles especially by investment banks which led to their downfall. According to some rumors, most of the hedge funds are also in trouble. If that is true, we will see big shocks in global stock markets. Global banks are trying hard to overcome this crisis by infusing liquidity into system (unlike in 1929). Will they succeed?
Image courtesy: Bloomberg.
Worrying sign: Credit crisis is gradually spreading to European markets. Biggest banks of Belgium and Germany were rescued by Governments. You will hear more bankruptcy news from England and Spain banks in the coming days. Unless all major economies and central banks take aggressive coordinated measures, this credit crisis will take the economies of United States and Europe into deep depression. If China will decide to sell its foreign reserves, American economy will go into depression within 1 week of its selloff. That's the severity of this crisis. You may never experience this range of economic crisis in your life time. After the current turmoil, some positive reforms will happen in the global economy which augur well for long term financial growth.
Effect on India: Indian IT companies will be severely tested in the coming days. According to current situation, Europe will go into deep crisis within 1-2 months. Bailout measures by American and European Governments are not yielding desired results. So diversification by export companies will not help them in these times due to global crisis.
Advice to long term investors: If you are a long term investor, current crisis will test your patience levels. Please do not take any panic decisions. Things will return to normal after the current turmoil. You will get exceptional returns if you can invest in stock markets for 24-30 months.
5 best Sensex stocks for long term investment horizon:
1. Larsen and Toubro (L&T):
This is the best stock in Sensex for long term investors. L&T surprised analysts with their better than expected results. But stock still underperformed to bad market sentiment. As L&T entered into niche areas, margins will improve in the coming quarters. Upcoming demergers will improve L&T valuations in the coming quarters. Huge order book is another plus point. Announcement of bonus is a near term trigger after current turmoil.
CMP: 2,564. EPS: 74.3 P/E: 34.5
Expected EPS for FY2009: 105-110.
Ideal entry price: 2,350-2,400.
1 Year target: 3,600-3,800.
Best investment duration: 3 years to get wonderful returns from this giant.
2. ICICI Bank:
Real strength of ICICI Bank lies in their subsidiaries. ICICI securities IPO is a near term trigger.
CMP: 733. EPS: 37.3 P/E: 19.6
Expected EPS for FY09: 48-52.
Ideal entry price: 660-680.
1 year target: 1150-1,250.
3. State Bank of India (SBI):
Attractive valuations but unpredictable government interference.
CMP: 1,249. EPS: 106 P/E: 11.7
Expected EPS: 135-140.
Ideal entry price: 1050-1100.
1 year target: 2,000-2,200.
Best investment duration: 18-24 months.
4. Reliance Communications:
Another "Must buy" stock for long term investors if they don't overly paid for acquisitions. Reliance Infratel IPO is a short term trigger.
CMP: 491.6 EPS: 12.5 P/E: 39.2
Expected EPS for FY09: 25-28.
Ideal entry price: 470-480.
1 year target: 750-800.
5. Reliance Industries:
This stock holds enormous intrinsic value. Reliance will give good returns for patient shareholders who invested for long term. Kakinada gas will change fortunes of shareholders in short term. Invest in Reliance; believe in Ambani; forget about it.
CMP: 2,100 EPS: 138 P/E: 16
Ideal entry price: 1,800-1,900.
1 year target: 3,000-3,200.
Duration: Invest for 2-3 year to get complete benefits.
Infosys, Bharti Airtel and Grasim are good stocks to get safe moderate returns in these difficult times. Fortunes of DLF and M&M will depend on inflation. Recent salary hikes may hit the balance sheets of companies like BHEL. Tata Steel is best underdog stock for FY09. We will get more clarity on these stocks in the next quarter results.
Equity investment should always be done cautiously. Though Financial markets (especially stocks trading) looks lucrative, if one fails to understand the finance, better you leave it to stock market experts (Mutual Funds, portfolio management etc.) Invest Wisely,Trade Cautiously !! Happy investing !!
Dalal Street magazine published a useful article on India's fastest growing Companies. It picked 25 Companies in each of 3 categories (large caps, mid caps and small caps) basing on their sales growth over the past 5 years. These companies constantly reported increase in sales from FY03 to FY08. But many of these companies (especially real estate players) may not maintain same sales growth in FY09. It is not ethical to write about all these companies as the issue is still on stands. But I am listing some of my favourite companies (along with rank) for reference. Please do your own research before investing in them.
India's fastest growing Companies:
A. Large Companies (sales of more than Rs 2,500 crore):
1. Videocon Industries: Dhoots are making strategic moves. Company paid higher advanced tax in September. When will this sleeping giant wake up in stock markets?
2. Bharti Airtel: Consistent performance but don't expect fireworks.
8. Sesa Goa: Slow down in China is a bad news over short term.
9. Thermax: Good performer.
15. HDFC Bank
20. NMDC Limited
B. Medium Companies (Sales of Rs 600 crore- 2,500 crore): Many of these companies are operating in niche space and strategically diversifying into emerging sectors.
5. ICSA India Limited: Steep correction due to FII selling.
9. Shriram EPC Limited: very good results.
12. Electrotherm: Largest electric vehicle maker.
13. Rohit Ferro-tech:
23. Subhash Projects and Management: Good long term play.
C. Small Companies (Sales less than Rs 600 crore): Many of these small caps have the ability to become mid caps and large caps over the next 3-5 years. Don't give too much importance to recent price correction. These shares are strictly meant for patient long term investors.
14. MIC Electronics
15. Tanla Solutions
20. Geodesic Information
21. Bartronics India
22. OnMobile Global
Note: These companies were selected by the magazine basing on their sales growth over the past 5 years. But past performance is not a guarantee for future performance. Rising costs, global meltdown and real estate crisis may affect the performance of some of the companies in the list. But it provides good insights over the performance of some of the best Indian companies.
Request to readers: Some readers are mailing me with ordinary requests like "what is stock market?" and innocent questions like "how to invest in stock markets?" etc. It is difficult to answer to these vague questions through blog or mail.
Significant news:
1. RBI cut CRR by 50 basis points to increase liquidity in the system. Although RBI stated it as a temporary measure, it is an aggressive timely measure by Reserve Bank of India. Interest rate sensitive stocks will react positively to this news.
2. SEBI removed restrictions on P-notes. This will have significant impact on the FII investments. Indian markets may react positively to these liquidity and sentiment boosting decisions. These steps may take BSE Sensex to above 13,000 levels if global conditions will not affect Indian markets. But global economic situation is gradually deteriorating from bad to worse.
Must read: Wonderful article on legendary acts of Warren Buffett and J.P. Morgan during extreme financial crisis. Buffett will be remembered forever for his daring acts like Morgan.
Financial note: Derivatives were invented as hedging instruments but many traders are using them as investment vehicles especially by investment banks which led to their downfall. According to some rumors, most of the hedge funds are also in trouble. If that is true, we will see big shocks in global stock markets. Global banks are trying hard to overcome this crisis by infusing liquidity into system (unlike in 1929). Will they succeed?
Image courtesy: Bloomberg.
Worrying sign: Credit crisis is gradually spreading to European markets. Biggest banks of Belgium and Germany were rescued by Governments. You will hear more bankruptcy news from England and Spain banks in the coming days. Unless all major economies and central banks take aggressive coordinated measures, this credit crisis will take the economies of United States and Europe into deep depression. If China will decide to sell its foreign reserves, American economy will go into depression within 1 week of its selloff. That's the severity of this crisis. You may never experience this range of economic crisis in your life time. After the current turmoil, some positive reforms will happen in the global economy which augur well for long term financial growth.
Effect on India: Indian IT companies will be severely tested in the coming days. According to current situation, Europe will go into deep crisis within 1-2 months. Bailout measures by American and European Governments are not yielding desired results. So diversification by export companies will not help them in these times due to global crisis.
Advice to long term investors: If you are a long term investor, current crisis will test your patience levels. Please do not take any panic decisions. Things will return to normal after the current turmoil. You will get exceptional returns if you can invest in stock markets for 24-30 months.
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