Experts' stock ideas to play volatile markets

The market on Thursday broke down after a rally this week. Experts talk about the road ahead and advise stocks/sectors.

“There is still momentum in the global liquidity and you will have large bouts of liquidity,” said Jagdish Malkani, Country Head of Taib Capital. He added that valuations especially for front-liners were rich and that those with a long-term view should buy only stocks like defensives or out-of-favour sectors like telecom due to current valuations.

Here’s his advice to play the liquidity game: “I would certainly keep a fair bit of cash sloshing around for such times when you have such odd bloodbath. What works for you varies but it could be anywhere from 20-50% cash levels for such occasions,” he said, adding, “My appeal to retail and high net-worth individuals would be in at least 80% largecaps because while the midcaps give you that great run-up and the huge hits to the boundary and the multi-baggers — God help you if the music stops, as we know those go completely into the ice age whereas at least if you have Reliance or HDFC or SBI you cannot lose that much sleep.”

Stock/sector picks

Media stocks: Malkani said he prefers the print media space — “they make real money as opposed to a whole lot of other media space,” — and likes Jagran Prakashan though it had become a bit expensive of late. “NDTV is also making a bit of a play, it’s one that is popular with FIIs and there is a story there with an NBC stake coming through possibly. If that news comes out whether it’s being placed again and at what levels — that would bring a lot of cash into the company.”

Shree Renuka Sugar: “The company recently bought a Brazil firm with about 45,000 acres of land for cultivation of sugarcane with a cane crushing of about 20,000 tonne per day,” said Investment Advisor SP Tulsian, adding that the financials of the company would improve vastly because of the deal. “The company should be able to post an earnings per share of close to Rs 30 plus for FY10 post the deal, which is quite positive.”

Divestment candidates: The run-up seen in many of the potential PSU divestment candidates was unwarranted, said Tulsian. He added that the euphoria of the government divesting some stake in those companies coupled with their low-float in the market were resulting in a run-up beyond what fundamentals called for.

Century Textiles: Anyone with a six-month view could buy Century Textiles, said Tulsian. “The company is starting work of a mill in Worli, Mumbai,” he said. “The only concern for the Q2 results was the company’s paper division as it was making losses otherwise it would have been a profitable quarter. In that quarter, it posted a loss of about Rs 25 crore on EBIT level. Overall the Worli news is positive for the stock.”