Diwali has come calling and Samvat 2066 promises to be more optimistic and festive with a mood of celebration in the air. This is a sea change from Samvat 2065 which was more sombre and we were all staring long and hard at a year of tough times. Tides have changed and recession is receding and hope once again springs.
This Diwali, instead of doing the usual ‘buys’, a list of stocks to buy for Diwali, we at Premium Investments have worked out a bag of sectors which you should bank on. And yes, we have also mentioned the frontliners in those sectors which you should make a part of your long term portfolio. Have a look.
1: INFRASTRUCTURE:
India is growing and every city you now go to, is in a state of flux, with major development of roads, metros and bridges being built. And this pace of rebuilding India will only gather more momentum. The news on the street is that most companies have an order book which runs into three years and their production capacities are booked to the brim. Projects which are expected to speed up work are power, NHAI projects and irrigation. The economy was slow last fiscal but the indications from the current Q1 and Q2 results have been positive, indicating that recovery is underway and as the year progresses, activity will only pick up further. So as industrial activity grows, infra companies are expected to get some more orders from the private sector too. The sector is expected to grow at an average of 20-22% in FY10. Most of the infra companies are expected to post a good performance for Q2FY10 as all work which was put on hold due to the elections have once again picked up and they are sure to report higher billing and consequentially, higher bottomlines.
India’s biggest drawback, apart from the red tapism and corruption which have no cure, is inadequate roads, power, ports and railways which have held India back from realizing its full growth potential. Now that funds are available for the construction of these infra facilities, growth in India is expected to be robust in coming years.
Stocks to bank on:
Ø GMR INFRA
Ø MUNDRA PORT
Ø GVK POWER
Ø JP ASSOCIATES
Ø PUNJ LLOYD
2: NON-FERROUS METALS:
Apart from China being the main driver, other factors like past production curtailments; tighter scrap supply; and improving demand are all indicative of major improvement in prices of non ferrous metals over the next few months. Hindustan Zinc hiked prices of zinc by Rs.2800/tonne and lead by Rs.1500/tonne following the surge on the LME. Zinc, primarily used in producing galvanised steel, is now priced at Rs 1,12,800 per tonne, while rates of lead, used mainly by battery, rubber and paint industries, stands at Rs 1,21,000 per tonne. Zinc prices on LME have risen to $1,987 a tonne from $1,900 a tonne last week. Lead prices moved up to $2,168 per tonne from $2,150 per tonne last week.
The outlook for aluminium is also good. In Asia excluding China, demand had slumped 12% in 2008, but in the second half of 2009, Asia excluding China is expected to grow by 22% over the same period last year. This is due to demand picking up and higher prices for aluminium and alumina. The auto sector picking up is one major factor which is contributing to the surge in prices. And this is expected to only continue.
The sector is in for a good time with the triggers being the recent uptrend in the international market (mainly on LME) and a sustainable increase in the demand on a long-term basis.
Stocks to bank on:
Ø HINDUSTAN ZINC
Ø STERLITE INDUSTRIES
Ø HINDALCO
3: BANKING:
the first set of Q2FY10 results from some of the banking stocks indicates that good times are set to role out for the sector. After a year of being literally tied down, the banks now flush with funds are eager to lend. Factory output is picking up, so disbursals to corporate would go up. Retail sector which was under a tight leash will once again see activity as demand is picking up, especially for housing sector and also for automobiles. Stock markets are up which will mean better asset management income. The momentum is on as the fund flow is continuing. Indian companies had postponed capital investments following the economic downturn, but stimulus spending, festivals and signs of strengthening demand are expected to boost loan demand in the December quarter. With industrial output picking up, credit growth is expected to only increase in the near future. PSU banks have completed a large part of their loan restructuring in current fiscal, no negative surprises are in store for the sector, as of now. PSU banks will benefit from treasury gains amid volatility in prices of government securities during the quarter.
Q2 might continue to be sedate but real credit off take and lending to core sector could be seen taking off from Q3 onwards.
Stocks to bank on:
Ø SBI
Ø PNB
Ø SOUTH INDIAN BANK
Ø DHANALAKSHMI BANK
Ø ICICI BANK
Ø AXIS BANK
Ø HDFC BANK
4: AUTOMOBILE:
This is one sector which has been showing good growth numbers on a MoM. Almost every auto company has reported higher sales in September and based on results for Q2 which have been out till now, the year ahead promises to be one of strong rebound. For the first half of FY10, passenger vehicle sales have jumped 13.5%, while two- wheelers grew at more than 15.5%. Commerical vehicles sales have been down when looked at the half year but since August 2009 have been showing a growth into positive.
The going looks good for the sector on the back of strong volume growth, further backed by lower costs, lower interest rates. The pay hike given to Govt employees has surely boosted sales to a large extent and news on the street is that they have started getting the balance 60% of the wage arrears as per the VIth Pay Commission and that would probably mean some more car sales. Auto companies tying up with various PSU banks for easy auto loans has also helped. Numerical growth in November-December and by the end of the financial year is expected to see some positive growth. Return of financing, especially to CV makers is expected to help vastly. Demand is expected to pick up this festive season and we are essentially looking at a double digit growth for the sector in FY10.
Stocks to bank on:
Ø MAHINDRA & MAHINDRA
Ø MARUTI SUZUKI
Ø TATA MOTORS
Ø HERO HONDA
5: CAPITAL GOODS:
If we talk of growth in the superlative for the infra sector, can the capital goods sector be far behind? These are the companies which will make the equipments to power the infra needs of India. And naturally, the capital goods companies would do extremely well.
The sector, which saw some sluggish growth due to holding back of orders is all set to get a bounty of orders. Infact order books have already started getting plump as has been seen in the performance of some of the companies which have announced their results. Q1 had been better, Q2 will be good but real growth will be seen from second half of FY10. Be it big or small, any reputed company which makes capital goods, from electrical equipments to exploration rigs, from machinery to motors, and from construction equipment to cement plants, capital goods companies may see dazzling growth of around 20-30% by end of FY10.
Stocks to bank on:
Ø THERMAX
Ø BHEL
Ø CROMPTON GREAVES
Ø SIEMENS
Ø ALSTOM
6: PHARMA:
If IT was the ‘big’ thing which has happened to India in the mid-90’s, pharma, rather R&D in pharma is an equally big thing right now. The sector is expected to show very good results in Q2FY10 due to lower raw material costs and the slow recovery in the US economy. Domestic formulation companies are expected to do well due to the advent of the swine flu, monsoon and then the October heat. US market is slowly improving and companies which have sizeable exports will now see a strong recovery.
Companies able to meet USFDA norms and those with the ability to derisk business would stand to do much better.
Stocks to bank on:
Ø RANBAXY LABS
Ø WOCKHARDT
Ø LUPIN
Ø CIPLA
Ø DR.REDDY’S
This Diwali, instead of doing the usual ‘buys’, a list of stocks to buy for Diwali, we at Premium Investments have worked out a bag of sectors which you should bank on. And yes, we have also mentioned the frontliners in those sectors which you should make a part of your long term portfolio. Have a look.
1: INFRASTRUCTURE:
India is growing and every city you now go to, is in a state of flux, with major development of roads, metros and bridges being built. And this pace of rebuilding India will only gather more momentum. The news on the street is that most companies have an order book which runs into three years and their production capacities are booked to the brim. Projects which are expected to speed up work are power, NHAI projects and irrigation. The economy was slow last fiscal but the indications from the current Q1 and Q2 results have been positive, indicating that recovery is underway and as the year progresses, activity will only pick up further. So as industrial activity grows, infra companies are expected to get some more orders from the private sector too. The sector is expected to grow at an average of 20-22% in FY10. Most of the infra companies are expected to post a good performance for Q2FY10 as all work which was put on hold due to the elections have once again picked up and they are sure to report higher billing and consequentially, higher bottomlines.
India’s biggest drawback, apart from the red tapism and corruption which have no cure, is inadequate roads, power, ports and railways which have held India back from realizing its full growth potential. Now that funds are available for the construction of these infra facilities, growth in India is expected to be robust in coming years.
Stocks to bank on:
Ø GMR INFRA
Ø MUNDRA PORT
Ø GVK POWER
Ø JP ASSOCIATES
Ø PUNJ LLOYD
2: NON-FERROUS METALS:
Apart from China being the main driver, other factors like past production curtailments; tighter scrap supply; and improving demand are all indicative of major improvement in prices of non ferrous metals over the next few months. Hindustan Zinc hiked prices of zinc by Rs.2800/tonne and lead by Rs.1500/tonne following the surge on the LME. Zinc, primarily used in producing galvanised steel, is now priced at Rs 1,12,800 per tonne, while rates of lead, used mainly by battery, rubber and paint industries, stands at Rs 1,21,000 per tonne. Zinc prices on LME have risen to $1,987 a tonne from $1,900 a tonne last week. Lead prices moved up to $2,168 per tonne from $2,150 per tonne last week.
The outlook for aluminium is also good. In Asia excluding China, demand had slumped 12% in 2008, but in the second half of 2009, Asia excluding China is expected to grow by 22% over the same period last year. This is due to demand picking up and higher prices for aluminium and alumina. The auto sector picking up is one major factor which is contributing to the surge in prices. And this is expected to only continue.
The sector is in for a good time with the triggers being the recent uptrend in the international market (mainly on LME) and a sustainable increase in the demand on a long-term basis.
Stocks to bank on:
Ø HINDUSTAN ZINC
Ø STERLITE INDUSTRIES
Ø HINDALCO
3: BANKING:
the first set of Q2FY10 results from some of the banking stocks indicates that good times are set to role out for the sector. After a year of being literally tied down, the banks now flush with funds are eager to lend. Factory output is picking up, so disbursals to corporate would go up. Retail sector which was under a tight leash will once again see activity as demand is picking up, especially for housing sector and also for automobiles. Stock markets are up which will mean better asset management income. The momentum is on as the fund flow is continuing. Indian companies had postponed capital investments following the economic downturn, but stimulus spending, festivals and signs of strengthening demand are expected to boost loan demand in the December quarter. With industrial output picking up, credit growth is expected to only increase in the near future. PSU banks have completed a large part of their loan restructuring in current fiscal, no negative surprises are in store for the sector, as of now. PSU banks will benefit from treasury gains amid volatility in prices of government securities during the quarter.
Q2 might continue to be sedate but real credit off take and lending to core sector could be seen taking off from Q3 onwards.
Stocks to bank on:
Ø SBI
Ø PNB
Ø SOUTH INDIAN BANK
Ø DHANALAKSHMI BANK
Ø ICICI BANK
Ø AXIS BANK
Ø HDFC BANK
4: AUTOMOBILE:
This is one sector which has been showing good growth numbers on a MoM. Almost every auto company has reported higher sales in September and based on results for Q2 which have been out till now, the year ahead promises to be one of strong rebound. For the first half of FY10, passenger vehicle sales have jumped 13.5%, while two- wheelers grew at more than 15.5%. Commerical vehicles sales have been down when looked at the half year but since August 2009 have been showing a growth into positive.
The going looks good for the sector on the back of strong volume growth, further backed by lower costs, lower interest rates. The pay hike given to Govt employees has surely boosted sales to a large extent and news on the street is that they have started getting the balance 60% of the wage arrears as per the VIth Pay Commission and that would probably mean some more car sales. Auto companies tying up with various PSU banks for easy auto loans has also helped. Numerical growth in November-December and by the end of the financial year is expected to see some positive growth. Return of financing, especially to CV makers is expected to help vastly. Demand is expected to pick up this festive season and we are essentially looking at a double digit growth for the sector in FY10.
Stocks to bank on:
Ø MAHINDRA & MAHINDRA
Ø MARUTI SUZUKI
Ø TATA MOTORS
Ø HERO HONDA
5: CAPITAL GOODS:
If we talk of growth in the superlative for the infra sector, can the capital goods sector be far behind? These are the companies which will make the equipments to power the infra needs of India. And naturally, the capital goods companies would do extremely well.
The sector, which saw some sluggish growth due to holding back of orders is all set to get a bounty of orders. Infact order books have already started getting plump as has been seen in the performance of some of the companies which have announced their results. Q1 had been better, Q2 will be good but real growth will be seen from second half of FY10. Be it big or small, any reputed company which makes capital goods, from electrical equipments to exploration rigs, from machinery to motors, and from construction equipment to cement plants, capital goods companies may see dazzling growth of around 20-30% by end of FY10.
Stocks to bank on:
Ø THERMAX
Ø BHEL
Ø CROMPTON GREAVES
Ø SIEMENS
Ø ALSTOM
6: PHARMA:
If IT was the ‘big’ thing which has happened to India in the mid-90’s, pharma, rather R&D in pharma is an equally big thing right now. The sector is expected to show very good results in Q2FY10 due to lower raw material costs and the slow recovery in the US economy. Domestic formulation companies are expected to do well due to the advent of the swine flu, monsoon and then the October heat. US market is slowly improving and companies which have sizeable exports will now see a strong recovery.
Companies able to meet USFDA norms and those with the ability to derisk business would stand to do much better.
Stocks to bank on:
Ø RANBAXY LABS
Ø WOCKHARDT
Ø LUPIN
Ø CIPLA
Ø DR.REDDY’S
SOURCE: WWW.PREMIUMINVESTMENTS.IN (BY S P TULSIAN)
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