With Samvat 2073 coming to an end, a common question lingering in the minds of all investors is where to invest in the coming year.
In the year that is coming to a close, the equity market has seen a strong bull run even though some consolidation took place during the past quarter. Indian equity has given the best return till now amongst all the asset classes with 23.3%, while gold and silver have given 12.8% and 8.1% returns, respectively. Crude Oil, however, has corrected in 2017 with a 3.5% dip.
The growing confidence of the Indian investor is also evident from the increase in allocation in financial assets as against traditional physical assets of gold and real estate.
Even amongst financial assets, Indians have started to allocate more towards capital market equity instruments such as mutual funds (as against traditional bank FDs), which is offering additional cushion and buffer for Indian markets against volatility associated with FII flows. This change in asset allocation by Indians has resulted in Mutual Fund AAUM (Average Assets Under Management) surpass Rs 21.45 lakh crore in June 2017. Of this, equity AUM has surpassed Rs 5 lakh crore.
In a report, Karvy Stock Broking Ltd has listed 10 large cap and mid cap ideas that an investor should look out for.
HDFC Bank: HDFC Bank is expected to outpace the credit growth in the system by ~3-4% points and to grow at a CAGR of over 25% during FY17-FY20E. It’s healthy and well diversified loan book is expected to register a healthy growth driven mainly by a healthy mix of retail and corporate loans & market leadership in credit cards.
HeroMoto Corp: Total domestic sales volume for HeroMoto Corp Ltd for H1FY18 stands at 3.7 million units posting a growth of 8.8% year-on-year driven by new launches and capacity additions. With robust sales volume growth through increased geographic presence and capacity addition, HMCL is poised to take full advantage of the demand domestically and in other emerging markets.
Hindustan Unilever Limited (HUL): With its improving operational efficiencies, focuses on diversification and aggressive strategies in expanding distribution, HUL is moving up the value chain and capturing more market share. The company’s total revenue and margins is expected to grow further on the back of revival in demand scenario, softer raw material prices and improved operational efficiencies.
ITC Ltd: ITC is expected to register double digit growth in the next 2 years, by strengthening its leadership position in cigarettes segment, new investments and higher growth in FMCG business and steady performance in non-FMCG segments. ITC, with its expansion strategies, is aspiring to become India’s no.1 FMCG player. Going forward, margins from FMCG business along with growth from core business are likely to boost the profit margins of the company further.
Kotak Mahindra Bank: Acquisition of ING Vysya bank has provided KMB with wide geographical presence and synergies are expected to flow in soon. Also KMB has got regulatory approval for acquiring BSS Microfinance which further expected to increase the presence across its product mix. KMB’s recent entry into consumer durable financing segment along with improved outlook on asset quality, better operating performance & significant value addition from subsidiaries, is likely to lead to a positive extended journey.
Larsen & Toubro Ltd: L&T is well positioned to capture growth in various segments of the Indian economy with its excellent execution capabilities in diverse sectors like infra, oil & gas, defence, metals & mining, railways and various others. Currently, margin improvement is driven by infrastructure, heavy engineering and hydrocarbon businesses; and in the short run, these are likely to drive the margins and further in the long run defence is likely to drive the growth and profit margins.
Maruti Suzuki India Ltd: With increasing market share across the passenger vehicle segments, MSIL is all geared up to fully benefit with the upcoming demand. Also, order book backlog and dealership expansion give it the necessary impetus to boost their premium brand “NEXA” which is well-received across the nation.
Reliance Industries Ltd: RIL is expected to maintain profitability in its core business with a capex (petrochemical cracker, petcoke gasification and US ethane imports) that increases the operational efficiency and volumes across the refining & petrochemicals business which are likely to add to operating profits in FY18E while new businesses like Reliance Jio and retailing are likely to trigger the next level of growth and boost revenues in FY19E.
State Bank of India Ltd: SBI with its focus on quality loan book growth, CASA share in deposits, sustained NIMs of over 3% along with emphasis on reducing NPAs and fresh slippages augur well in the long term. Merged entity of SBI presents a case for biggest and well diversified balance sheet that mirrors the domestic economy available at bargain valuations from a long term investment perspective.
Zee Entertainment Enterprises Ltd: The company enjoys sound financial health in terms of healthy operating margins, high return ratios and virtually debt free status. The company is in cash-rich position and has regularly paying dividend wherein dividend payout ratio stands at 22.3%. Besides, increased demand of digitization as major source of entertainment augurs well for the company.
Apar Industries Ltd: The one-time disruptions due to GST and raw material pricing will vanish and thereafter recovery in demand will be visible. With accruing benefits of UDAY and other government policies, Apar stands at a very strong place.
D.B.Corp Ltd: Overall EBITDA margins of this company is likely to witness improvement going forward with strengthening foothold in Bihar in the print segment.
GHCL Ltd: Given the backdrop of aggressive capacity expansion plan coupled with increasing utilization rate and healthy financials in terms of high RoE, high margin, consistent payment of dividend, the company is likely to witness good topline and bottom-line growth in years to come.
Gujarat Mineral Dev. Corporation Ltd: The company enjoys sound financials in FY17, in terms of EBITDA margin at 26.4%, PAT margin at 20.5%, dividend payout ratio at 29.4% and net debt-to-equity ratio of -0.01x. Further, lower GST rate is likely to significantly boost sales volume. Thus, sound financial health and brighter sales outlook make GMDC an investment value proposition.
Greaves Cotton Ltd: Greaves domestic market to turn robust with BSIV implementation apart from new product launches, new geographical presence, potential addition of customers, ‘Greaves Auto Care’-new service offering and fructification of R&D efforts for BSVI engines could all shape into FY18E, FY19E and beyond.
Jain Irrigation Systems Ltd: JISL, on being best-in class, fully integrated, global operations and with cutting-edge technologies and focus on R&D, it is well positioned to capitalize on large domestic and global growth opportunities in MIS, Pipes businesses.
LT Foods Ltd: Given the backdrop of strategies of expanding geographical reach and adding new products to its portfolio, LT Foods Ltd is well positioned to capitalize on ever growing basmati rice market. The company enjoys great brand recall and its branded business has been growing at CAGR of 17.3%.
MPS Ltd: MPS Ltd’s commitment to the inorganic approach for growth is evident by its decision to withhold the dividend payout during the year. Operating performance will continue to be impacted in the near term due to the recent acquisition until the associated costs get streamlined.
Tata Elxsi Ltd: With introduction of FY18E and FY19E figures, the company’s revenue is expected to grow at a CAGR of 18.3% for the period FY17-19E.
VST Industries Ltd: The implementation of GST may lead to consolidation in the industry which will in turn, reduce price competition thereby benefiting industry leaders like VST Industries. The company will have revenue growth at CAGR of 12.5% during FY17-19E.