Staying The Course In Difficult Times
Diwali is not only a time for celebration but also enlightenment. One of the three Pavamana Mantras of the Brihadaranyaka Upanishad says this succinctly - ‘Tamaso ma jyotirgamaya’- meaning ‘From darkness, lead me to the light’. Inner awakening, introspection and measured, enlightened change is the imperative need of today’s difficult times. These are truly troubled times. India’s macro growth has sputtered to a four-year low (5%), rising stress is being reported from its financial system (esp. NBFCs), high-frequency indicators like auto sales volumes, indirect tax collections and credit growth have fallen while government bravely continues on the policy reform path, spends aggressively on mega-infra projects and struggles with legacy issues. Long term investors have lost money in many (if not most) of their conviction stock picks, with super-normal returns being concentrated in an ever narrowing band of high quality companies. Traders have seen higher volatility with persistent and disruptive changes in corporate strategies, business models, government policies and geopolitics. Which brings us to the key question this Diwali - what should the Indian investor do?
First, let’s get the basics right. It is not just the slowdown, but disruption that is hitting stock markets today. You can see it in the Diwali bumper sales at Amazon / Flipkart, movies on Netflix, food service from Domino’s, ridesharing by Uber and Ola, insta-loans on bank apps and shopping, eating out, travel offers and investment services from your bank. If you think all innovation and disruption is ‘digital’, consider that a sector like autos is on the cusp of launching electric vehicles. Grocers, restaurants and caterers in the periphery of big cities are now finding better bargains via self service at Cash & Carry outlets like Metro.
It’s not just business models, processes and strategies that are undergoing disruptive change. The rules of doing business and behavior are changing in India. GST is driving up formalization. The use of cash in retail trade is falling. Household savings are getting more financialised (into mutual funds, insurance and direct equity) as the lure of real estate and gold falls (though the lure of fixed income stays given the wealth erosion in equities seen lately). In the last 18 months, net equity inflows into MFs are mostly attributable to SIPs and not discretionary investing! India’s millennials want a rule-based economy with higher consumption and comfort levels. Their choices are radically different as evidenced in their preference for a compliant, sharing and digital economy – whether it is car rides, shared apartments, Netflix or online shopping.
So, dear investors, the message for all of us this Diwali is to change with the times. And, in our stock ideas, to choose managerial excellence over connections in powerful places; to choose integrity over compromise; customer franchise over cyclical price rise; free cash flows and responsible financial structures over reckless leverage. These carefully selected stocks may help in navigating the rough seas of investing for you.
Happy Diwali! May we all make the transition from looming ‘tamas’ to the inner ‘jyoti’ this Samvat...
Our Top Picks
* Affle (India) Ltd : Buy at LTP and add on dips to band 1035-1045 Target 1348 With Red Flag 977 For Time Horizon Till Next Diwali.
* Amber Enterprise India Ltd : Buy at LTP and add on dips to band 929.40-860 Target 1140 With Red Flag 770 For Time Horizon Till Next Diwali.
* Apollo Hospital Enterprise Ltd : Buy at LTP and add on dips to band 1330-1338 Target 1629 With Red Flag 1268 For Time Horizon Till Next Diwali.
* Bajaj Auto Ltd : Buy at LTP and add on dips to band 3009-2810 Target 3447 With Red Flag 2550 For Time Horizon Till Next Diwali.
* BEML Ltd : Buy at LTP and add on dips to band 877.6-810 Target 1048 With Red Flag 740 For Time Horizon Till Next Diwali.
* Deepak Nitrite Ltd : Buy at LTP and add on dips to band 275-281 Target 348 With Red Flag 257 For Time Horizon Till Next Diwali.
* Fairchem Speciality Ltd : Buy at LTP and add on dips to band 427-431 Target 569 With Red Flag 388 For Time Horizon Till Next Diwali.
* Garden Reach Shipbuilders & Engineers Ltd : Buy at LTP and add on dips to band 171.55-160 Target 202 With Red Flag 138 For Time Horizon Till Next Diwali.
* Muthoot Finance Ltd : Buy at LTP and add on dips to band 600-605 Target 751 With Red Flag 556 For Time Horizon Till Next Diwali.
* SBI Life Insurance Company Ltd : Buy at LTP and add on dips to band 839.65-795 Target 965 With Red Flag 730 For Time Horizon Till Next Diwali.
* Sudarshan Chemicals Ltd : Buy at LTP and add on dips to band 363-334 Target 460 With Red Flag 298 For Time Horizon Till Next Diwali.
* Ultratech Cement Ltd : Buy at LTP and add on dips to band 4206-3940 Target 4980 With Red Flag 3580 For Time Horizon Till Next Diwali.
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HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475
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