In the past one month, the share price of Rico Auto tanked 19.30 per cent at Rs 46.20 on September 2. (PTI)
China slowdown fears coupled with tepid Q1 earning of India Inc dented market sentiments in the ongoing financial year. As a result, the BSE Sensex declined 10 per cent during April 1 and September 2. During the same period, the share price of companies like DLF, Adani Power, GMR Infrastructure, Reliance Communications, Punjab and Sind Bank hit their new all-time high.
Barring the consumer durables stocks, the ongoing financial year remained depressing for other sectoral indices on the Bombay Stock Exchange. The BSE Realty index declined the most — 27 per cent at 1,229.15, it was followed by the BSE Metal index (down 25 per cent) and the BSE Power index (down 18 per cent). However, the BSE Consumer Durables index jumped around 2 per cent in the ongoing financial year till September 2.
Interest of foreign investors appears to have not been very encouraging in recent times. Foreign institutional investors remained net sellers in the domestic equity markets as they sold shares worth Rs 10,187.70 crore during April 1 and September 2. In August, their net outflow stood at Rs 16,877.30 crore.
Kapil Bali, chief executive officer, YES Securities (India), said, “Some reasons for this have been domestic as earnings growth has disappointed but the greater factor for this is global volatility. Issues in the eurozone, slide in the Chinese markets and expectations/timing of rate hike sin the US has led foreign investors to remain cautious. However, if we look at the longer term picture, India would emerge as a preferred investment decision for not just domestic investors but also for the foreign ones.”
JM Financial in a research report said, “The full blown effects of a Chinese slowdown on global growth are still being analysed and absorbed. Hence we anticipate more bouts of volatility in coming months given that the domestic investors may not have further ability to negate a global selloff, and since domestic earnings downward revisions are likely to continue. Our strong recommendation would be to be invested in companies that have the maximum resilience on earnings in coming quarters and are beneficiaries of big market shifts.
The recent downfall in the domestic equity markets has opened doors for investors who are looking for some decent investment options after the recent slide.
Below are some of the stocks on which experts are bullish after the correction.
Rico Auto Industries: The company supplies a wide range of high precision fully machined aluminium and ferrous components and assemblies to automotive OEMs across the globe. Rico’s integrated services includes design, development, tooling, casting, machining and assembly across ferrous and aluminium products.
In the past one month, the share price of Rico Auto tanked 19.30 per cent at Rs 46.20 on September 2. During the period, it touched a high and low of Rs 60.25 and Rs 44.75, respectively. After the correction, brokerage house Sharekhan, turned bullish on the company. In a research note, it said, “The stock of Rico Auto Industries (Rico) corrected due to the weak market conditions. There is no stock specific change in business environment that would warrant a steep fall. In our note dated August 14, 2015 we had downgraded the stock from Buy to Hold largely due to the discomfort on valuations. Now, after the price correction, the stock is again attractive on valuations and hence we have upgraded the stock to Buy with an unchanged price target of Rs 58.”
YES Bank: According to Religare Institutional Research, the share price of the bank has corrected around 35 per cent from its Mar’15 peak and offers an attractive buying opportunity at current levels. Concerns over asset quality and forex borrowings are overblown. The brokerage house does not anticipate any negative surprises on NPA or credit costs. The bank has an adequate swap structure in place to cover MTM losses on forex borrowings. Margins to remain well protected at current levels and loan growth to stay much ahead of peers.
Religare believes the share price of the company can touch Rs 1,075. On September 3, YES Bank shares were trading at Rs 666 apiece on BSE.
Bajaj Finance: The share price of the company declined over 11 per cent in the past month. Sharekhan in a research note said, “We have been positive on Bajaj Finance’s business model and strong earnings performance, the valuation after the recent correction has turned more reasonable. We believe the strong growth in assets under management (AUMs), superior asset quality and return ratios should maintain premium valuations to its peers.” On September 3, the share price of Bajaj Finance was trading 2.94 per cent higher at Rs 5176.25 in the morning trade.
Wonderla Holidays: The share price of the company has corrected over 20 per cent from its 52-time high. It hit a new 52-week high on January 23 this year. After the correction, Angel Broking believes, Wonderla Holidays now poses as a good buying opportunity. The brokerage house expects the share price of the company can touch Rs 322 in coming quarters.
Over the last three years, Wonderla Resort’s occupancy rate has increased significantly from around 30 per cent to 45 per cent. Also, Wonderla Resort has turned around at the operating level in FY2015. Angel Broking said, “Increase in footfalls at the Bengaluru park is likely to further boost growth for Wonderla Resort. Moreover, occupancy rate as well as profitability to rise, going forward.”
On September 2, Wonderla Holidays shares were at Rs 274.10.
JBF Industries: JBF Industries is engaged in the manufacturing of polyester chips, partially oriented yarn and polyester processed yarn/specialty yarn at its plants at Silvasa in the Union Territory of Dadra and Nagar Haveli and at Valsad (Gujarat). The company is one of the leading names in Polyester business in India.
In the past one month the share price of the company retreated 26 per cent to Rs 223.50 on September 2. It was at Rs 304.25 on August 3.
According to KRChoksey Shares & Securities, the recent correction in the stock price of JBF industries provides an excellent opportunity to enter the stock. The equity funding by Knights (KKR) to the tune of $150 million will allay investor concerns about its debt of $1.4 billion. The company is on course to improve its debt-equity ratio from 4.7 to 2.6 by FY17 respectively. KKR will take 20 per cent stake in JBF Industries and 14.5 per cent stake in its Singapore subsidiary respectively. Fund infusion from KKR will help JBF Industries to improve its cash flow and reduce its debt requirement for its ongoing Greenfield PTA project in Mangalore.
The brokerage house believes the share price of the company can touch Rs 482, going forward.
(Disclaimer: The stocks are recommended by the respective brokerage houses and not a recommendation from Financial Express online)
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