Market is volatile and will be very volatile going forward. In these volatile times it is better to avoid markets at the best at current levels. If you are already invested in the market, please hold on to that and don’t sell in panic.
If you think this market looks good to you and stocks are worth investing at current levels, stick to the sensex stocks and invest with dominant players with good corporate governance and solid leadership.
My all time favorite is Tata Steel and I wrote about them in my last article on July 20th where I almost recommended a buy at the level of Rs.200-210. Tata Steel has run almost 30 % from those levels and I still think that this a good bet at current price of 280 for a long term investor who can stick to the stock for at least 4-5 years.
It’s a buy from most of the big fund houses at current levels.
Other stock which requires attention is Tata Motors. The numbers going forward will be good and the numbers will come from JLR. India sales are not good because of the huge competition from local competitors like Maruti, M&M, Duster, and Honda. But JLR is doing extremely well.
Another strong performance by JLR: Tata Motors (TTMT) reported an in-line operating performance for 1QFY2014 with Jaguar and Land Rover (JLR) once again registering a robust performance. JLR witnessed a strong margin expansion of 200bp yoy to 16.5% on the back of superior product and geography mix, favorable currency impact and also due to softening of the commodity prices.
JLR’s wholesale and retail volumes have increased by 9 percent and 12 percent respectively. Sustained momentum in the Chinese market and new product launches suggest a healthy volume run-rate in the months to come.
Almost all the fund houses and brokers are bullish on Tata Motors.
My other favorite from IT pack is Tech Mahindra. During 1QFY14, among tier-II stocks, TECHM was the only company which reported a positive surprise in revenue growth. However, even companies that were facing challenges to growth in the first half of calendar year have guided strongly, citing an uptick in the US and discretionary spending.
We do not believe that there is a case for Tier-II’s valuation discount to Tier-I to converge in the near-to-medium term due to:  similar growth rates to Tier-I despite being only a fraction of their revenue base,  much lower profitability, due to scale and  even lower cash generation, on account of higher capex intensity, which comes more from acquisitions than from scale. Hence, we adopt a bottom-up approach to choose mid-cap and TECHM remains our top pick, given our expectation of further re-rating, as the merged entity continues to address portfolio issues, while executing strongly in an improving environment.
The Management indicated that the company remains confident of growth from the non-BT business with it continuing to see a robust deal pipeline across geographies. The revamped sales team post consolidation of Satyam and increased focus on sales efforts have started yielding results for the company.
Further given the significant currency tailwinds akin to peers, Tech Mahindra remains confident of maintaining margins at current levels. We expect a CAGR of 10.8 percent and 14.9 percent in USD and INR revenue respectively over FY2013-15E. We value Tech Mahindra at 13.5x FY2015E EPS of Rs 109 and maintain our Accumulate rating on the stock with a target price of Rs 1,470.
TCS is another favorite for those who believe in the real strong and big story.
We upgrade TCS due to (1) solid market-share gains in a competitive market, (2) continued depreciation of the Rupee, which provides cushion to earnings and acts as a margin buffer against pricing and competitive pressure and pushes back our margin-pressure view by 12-18 months and (3) lack of choices in Indian stock markets, which makes TCS relatively attractive.
TCS is helping enterprises to standardize, rationalize and transform their business operations to become operationally efficient and remain cost competitive in the market place. The Company is working closely with its customers, helping them to gain deeper insights into their customers’ needs and enabling them to realign their offerings accordingly.
TCS’ net profit jumps to Rs.38306.40 million against Rs.33176.80 million in the corresponding quarter ending of previous year, an increase of 15.46 percent. Revenue for the quarter rose 20.97 percent to Rs.179870.70 million from Rs.148687.10 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.19.57 a share during the quarter, registering 15.46 percent increase over previous year period. EBITDA is Rs.182455.60 millions as against Rs.150549.70 millions in the corresponding period of the previous year.
We prefer buying this at current level with a view that stock has huge potential and can touch 2500 levels in one year.
HCL Tech is another good stock on the roll.
For 4QFY2013, HCL Technologies (HCL Tech) reported inline set for results on revenue and operational margin front with overall bottomline ahead of expectations on the back of higher than expected forex gains and lower tax rate. HCL Tech won over USD1bn worth of multi-year, multi-million dollar deals during the quarter, thus sustaining its momentum of signing ~USD1bn+ total contract value (TCV) worth of deals, over the past few quarters. HCL Tech has displayed an industry-leading growth trajectory and has a strong position in one of the fastest growing service vertical of IMS.
HCL Tech has recorded a ~3 percent CQGR in its revenue over the past eight quarters. This is primarily on the back of infrastructure management services and application services maintaining their growth momentum and growing at par or higher than the company’s average growth rate.
The Q3FY13 earnings of HCL Tech were much ahead of street expectations. The topline of Rs 6,425 crore for Q3FY13 was up 2.4 percent QoQ while net income grew by a robust 7.8 percent QoQ to Rs 1,040 crore. EBIT margins were maintained at 19.9 percent (+10 bps).
On the service segment, engineering services contributed 17.1 percent to the revenue while infrastructure growing at 9 percent, emerged as the star contributor with 29.9 percent contribution to Q3FY13 revenue. EAS at 4.4 percent QoQ, at constant currency terms was another vertical that performed well.
Europe was the strongest geography at 6.3 percent QoQ growth followed by US at 3.6 percent and ROW at 0.1 percent constant currency terms. US contributed 57.1 percent whereas Europe contributed 28.9 percent to the revenues of the company in Q3FY13.
On the industrial front, manufacturing contributed 28.4 percent to the revenues in Q3FY13 followed by financial services at 25 percent. Public services reported healthy growth rate at 14.8 percent QoQ in Q3FY13 in constant currency terms.
During the current quarter HCL Tech has won multi-year transformational deals with a total contract value over $ 1 billion, including the multi-year infrastructure management services contract from US-based automaker Ford Motor Company for $ 100 million.
The total employee count declined by 791 employees QoQ to 84,403 in Q3FY13 despite gross addition of 5,146 employees. Net employees in IT services reduced by 1,000, while the BPO headcount rose by 209. Attrition rates for IT services rose by 60 bps QoQ to 14.2 percent in Q3FY13 while attrition for BPO was down by 80 bps to 7.5 percent.
We are still sticking to our suggestion to stick to these five stocks:
We will also advice you to look at Ranbaxy and BHEL at current rates.
No more commentary on stocks 🙂
You can suggest of you are tracking any stock or sector.