Sunday, November 15, 2009

8 stocks to watch out for in this falling market

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The stock markets are again in the correction mode. Till Friday (October 30) close, the Sensex had lost over 1,590 points, or 9.12%, since its Diwali day high of 17,493. Investors, at the same time, have lost Rs 4.6 lakh crore with BSE’s market capitalisation now being at Rs 53.5 lakh crore. All, however, is not lost and is not bad for investors at least as experts feel that some quality stocks with 10-30% retracement look more attractive in the present market scenario.

Here we take a look at some good stocks which have witnessed a correction over the last two weeks, in line with the declines in the broader markets, and are attractively placed in terms of investment:

1. Reliance Industries Ltd

Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History

Fall over the last 2 weeks (Till Friday morning): 15.7%

Outlook: The company has successfully executed its two mega ventures, viz. KG basin gas and the RPL refinery. “We expect them to be the key drivers of profitability over the next few years. We remain positive on RIL’s future growth prospects. After a recent fall at current market price of Rs 1950, RIL is currently trading at 16.8x and 12.5x of FY10E and FY11E earnings, respectively, which appears attractive. We expect RIL to deliver 30.8% CAGR in earnings over next two years (FY09 – FY11E). Historically the stock trades at an average of 15x its 1 year forward earnings. Considering this, our target price for the stock stands at Rs 2,475 (15x of FY11E earnings of Rs 165), providing an upside potential of 20% from current levels,” says Ashish Kapur, CEO, Invest Shoppe.

Invest Shoppe recommends a ‘Buy’ on RIL.

2. Tata Steel Ltd

Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History

Fall over the last 2 weeks: 19.2%

Outlook: Tata Steel is one of the top 10 steel producers in the world with an existing annual crude steel production capacity of 30 mtpa. It is an integrated steel plant and is geographically diversified through investments in Corus, Millennium Steel and NatSteel Holdings, Singapore and a well-established marketing network in 50 countries.

“The company has impressive expansion plans which have the potential to catapult it to one of the leading players in the steel industry. Steel as a commodity is in a long-term bull market and Tata Steel is likely to be one of the major beneficiaries. The demand from domestic as well as international players is expected to increase with the economic stability in the world,” says Kapur.

Invest Shoppe, therefore, recommends a ‘Buy’ on Tata Steel.

3. Maruti Suzuki India Ltd.

Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History

Fall over the last 2 weeks: 9.2%

Outlook: “Maruti will continue to be a dominant player in the PV segment, and will enjoy a preferred brand image in the domestic market. Moreover, capacity addition will provide it with additional support to spread its wings further into the overseas markets, and to enhance its exports. At the CMP of Rs 1, 380, the stock is trading at 15x FY2011E EPS,” says Sarabjit Kour Nangra, VP–research, Angel Broking.

Angel Broking recommends a ‘Buy’ on the stock, with a Target Price of Rs 1,656.

4. ICICI Bank Ltd

Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History

Fall over the last 2 weeks: 16.2%

Outlook: ICICI Bank has implemented a decisive strategy of cost-reduction and margin improvement, at the same time opening huge number of branches and maintaining large capital adequacy. This is positioning the bank quite well for the imminent upturn in GDP growth and even though near-term performance is likely to remain under pressure, from FY2011 the bank’s earning’s quality and growth rate are expected to show marked improvement.

Angel Broking recommends a ‘Buy’ on the stock with a Target Price of Rs 1,047.

5. Cairn India Ltd:

Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History

Fall over the last 2 weeks: 12.3%

Outlook: The company is set to emerge as one of India’s leading petroleum producer - and possibly the largest onshore producer - once its oilfields in Rajasthan reach peak production by FY12. Going ahead, the profits are likely to show astonishing returns on year on year basis assuming that company would be able to meet its production targets and there would not be any major negative movement in crude prices. Hence any weakness in the stock price should be used as a buying opportunity.

Invest Shoppe recommends a ‘Buy’ on Cairn India.

6. State Bank of India:

Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History

Fall over the last 2 weeks: 12.6%

Outlook: With its surplus liquidity and balance sheet size, “we believe SBI will be a major beneficiary of the pickup in credit demand going forward. Its non-banking subsidiaries - SBI Capital Markets, SBI Mutual Fund and SBI Life Insurance -- will benefit from uptick in capital markets and corporate activity. Its mammoth branch network (most of it already under Core Banking Solutions), increasing contributions from fee-based activities, comfortable capitalization, a well-diversified loan book and high proportion of low-cost deposits remain investment positives for the bank. At current market price of Rs 2190, it trades at 2x of its FY10E adjusted book value. In the banking sector it remains our preferred pick and should be bought on any fall,” says Kapur.

Invest Shoppe recommends a ‘Buy’ on SBI.

7. Punj Lloyd Ltd

Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History

Decline over the last two weeks: 31%

Outlook: The stock of Punj Lloyd has seen some beating after poor quarterly results and as 2HFY2010 is also expected to be under pressure. However, “we see it as an opportunity for long term investors to buy the stock considering its growth prospects and attractive relative valuations of 11.5xFY2011E earnings,” says Nangra.

Angel Broking recommends a ‘Buy’ on the stock with a Target Price of Rs 271, providing a potential return >30%.

8. Taj GVK Hotels & Resorts Ltd

Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History

Decline over the last two weeks: 19.3%

Outlook: The hotel industry is expected to witness an uptrend from 2HFY2010E, considering the visible signs of economic revival coupled with delays happening on the supply side. Considering Taj GVK’s dominant position in Hyderabad and its on-track expansion plans, it is believed ideally poised to benefit from the uptrend in the industry.

The stock is attractively priced at this juncture and Angel Broking recommends a Buy on the stock with a Target Price of Rs 180.


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