Many Indian companies have almost reached their pre-slump level in sales. Having scaled back expansion plans, they will soon churn out their full capacity. This will definitely leave no room for growth in terms of volume.
The following analysis of the companies excludes smaller companies, which typically fall hard during downsizing.
In the coming year, it is predicted that none of the investments in the stock market may yield above average returned in the next one year.It is observed that high net-worth individuals divert their investments at such times from stocks to structured debt products. Thus, safeguarding their capital invested.
Economist Paul Krugman has predicted the makings of the third depression. The fog of global uncertainty is not quite lifted. The immediate focus is hence to preserve capital while aiming for decent earnings. The long term returns from equities in India is 15 percent. The point considered mainly while analyzing stocks is that the investors should not overpay for growth. Also the stocks here include those having large domestic play and those that have shown dramatic consumption trends like real estate, auto, banks and financial service.
Let’s consider the auto sector first;
Maruti has been by far India’s largest car maker. The demand for small cars has continued to surge forcing Maruti to set up another plant. The stock is trading at a price to earnings ratio (P/E) of 16. The stock has lot of steam
Exide is indirectly dependent on the growing automobile industry. This battery making company captures around two thirds of the batteries that go into cars and trucks. The management also believes that electric vehicles and hybrid vehicles could be its next big opportunity. Escorts is another stock that will seem fully valued.
Banking sector is a sector that has a lot of companies that can be considered to provide value to investors. Major picks include ICICI bank which is a good buy at 1.85 times its book value. The company stock has definitely signaled a clear return to profitable growth. Yes bank plans to foray into the high-return micro finance business. For the long term investor, this is one bank to catch at an early stage.
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The content on this blog should NOT be construed as investment advice. All information is a point of view, and is for educational and informational use only. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments
