1. Sensex to be volatile in first half of 2016, 5 stock picks for now

Sensex to be volatile in first half of 2016, 5 stock picks for now

Experts say this is a time to do some bargain hunting due to attractive valuations.

By: | Updated: January 27, 2016 1:39 PM
BSE Sensex, stock market today, live stock market coverage

Sensex fell 19.26 per cent from the peak of 29,681 on January 21, 2015 to 23,962 on January 21, 2016. (Photo: AP)

Benchmark indices BSE Sensex and NSE Nifty is nearly 20 per cent down from their all time highs which they touched in January 2015. Sensex fell 19.26 per cent from the peak of 29,681 on January 21, 2015 to 23,962 on January 21, 2016. According to market experts, global markets, China slowdown, disappointing corporate earnings of India Inc, crude oil prices, weak rupee and outflows by foreign institutional investors dented market sentiments during the period.

At present, the 30-share index BSE Sensex was trading at trailing twelve months price-to-earnings ratio of 18.17 against its average one year P/E ratio of 20.45. Vidya Bala, head of mutual funds research, Fundsindia.com, said, “We expect domestic equity markets continue to be volatile for the first half of 2016. It is a time to do some bargain hunting due to attractive valuations.”

Brokerage houses recommend HDFC Bank, ITC among 5 stocks that look promising in the current market scenario.

HDFC Bank: HDFC Bank on January 25 reported 20.1 per cent growth in net profit to Rs 3,356.8 crore for the third quarter ended December 2015 due to higher interest income. The private sector bank had a net profit of Rs 2,791 crore in the October-December quarter of last fiscal. According to Religare Institutional Research, HDFC Bank’s loan growth to remain well above industry levels in 2015-16 and 2016-17. The share price of the bank can touch Rs 1325 by the end of September 2016.

Persistent Systems: For Q3FY2016, Persistent Systems delivered a strong all-round performance, with 8.1 per cent Q-o-Q growth in revenues to $89.7 million. Sharekhan in a research note said, “We have maintained our estimates for FY2016 and FY2017 for Persistent Systems and have ‘Buy’ rating on the stock with unchanged price target of Rs 820.”

ITC: The stock has already corrected over 10 per cent in the past two months. According to Sharekhan, ITC is trading at a discounted valuation of 21.8x its FY2017E earnings. Most of the negatives have been priced in the current valuation and hence the downside risk is limited. ITC’s near-to-medium term focus sustains on improving the growth prospects of non-cigarette FMCG business and making it as one of the key drivers in long run. In view of the discounted valuation to some of the large-cap peers, Sharekhan maintained its ‘Buy’ recommendation on the stock with a revised price target of Rs 355. The government maintaining the excise rate on cigarette in the upcoming budget would act as key trigger for the stock.

Gati Ltd: Domestic logistics market is currently estimated at an approximate size of Rs 17,500 crore. The industry is highly fragmented with approximately 2500 players and 50 per cent share with unorganised market. With a direct correlation to GDP, trade growth, an expected improvement in the same would buoy revenue growth for logistic players. According to ICICIdirect.com, delay in passing Goods & Service Tax (GST) has sentimentally impacted the stock performance of Gati Ltd. However, hope hinges on attaining consensus. Gati is one of the largest organised surface logistics players and GST implementation would bring in higher volumes and newer opportunities for the company. The brokerage house in a research note said, “Incorporating the dismal performance of the current year, we trim our growth estimates in our two phase DCF model with revenue growth of 18 per cent CAGR in 2015-20E and 12 per cent CAGR in 2020-25. We continue to maintain ‘Buy’ rating on the stock.”

Shemaroo Entertainment: The company’s Q3FY16 revenues grew 16 per cent YoY driven by a strong 68 per cent YoY growth in new media. According to Religare Institutional Research, Shemaroo should benefit from the emergence of new media platforms. “We expect the new media segment to continue benefiting from improving high-speed bandwidth and smartphone penetration. Valuations at 12.3x FY17E P/E are attractive, and we maintain estimates and our March 17 target price of Rs 420,” the brokerage house said in a research note.

Disclaimer: The stocks are recommended by the respective brokerage houses and not a recommendation from Financial Express online.

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