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Which Indian Stocks to BUY for Long Term ? How to Choose ?

November 29, 2012

The Indian Equity Market is just 10% below its all time high of 21,000. Goldman Sachs has already upgraded India to OVERWEIGHT with a NIFTY target of 6,600, which is 5% higher than the previous all time high. If you’ve invested in a Diversified Portfolio of Blue Chips [Nifty / Sensex] stocks, hold them tight as they lead the rally. What next can we do about the CASH we are earning month over month ? It doesn’t make sense to keep BUYING the overheated ones but it takes a little research to identify the next horse which can win the jackpot.

The Theory NIFTY / SENSEX / MegaCap Stocks – Already Appreciated and hence they’ve found a spot in Indian Index. Data suggests that the outperformance in a stock that enters the Nifty comes BEFORE it enters the Nifty. So which Businesses / Companies Ir-respective of Corrupt / Scam Scarred Governments are likely to join the Index in the next few years will help you identify the stocks. Over 10 year period, entrants into the Nifty come from 50 stocks just below the Nifty and let us call them the Emerging Nifty 50 Stocks.

Then their are another 50 Stocks below the Emerging Nifty 50 and let us call them Dark Horse Nifty 50. So in all we have 100 stocks below NIFTY 50 with a marketcap in the region of $4bn to $1Bn as you go down the list. Now that you have the list, the next thing is to identify the Growth Sectors and Companies doing well in the same. Again good management, transparent accounting, growth etc are all the factors that have influenced in the decision making.

Affluence & Consumers Growth: There is no denying about the Indian Consumer Growth Story. ITC & HUL have already appreciated and the need of the hour is to find the next ITC. United Spirits, Titan,Colgate and Zee Entertainment have already ran too high. Some of the affordable names in this story are – Godrej Consumer, Idea, Jubilant Foodworks and Castrol. The Dark Horses and Best Picks are Bata, Pidilite, Marico and M&M Financial Services.

Healthcare: Emerging Nifty 50 are Glaxo Pharma and Apollo Hospitals. While the Dark Horse Nifty Stock is Max India and even Fortis Healthcare.

Industrials: It could range from industrial manufactured goods to ancillary units catering to domestic as well as global markets. Potential Stocks are Bosch, Exide Industries and Cummins India.

Infrastructure: So much that India lags but its not easy to identify the Dark Horse. One of them is Container Corporation of India and other is Adani Ports and SEZ [Adani Management is questionable but they have assured of transformation into a Professionally operated company]

Media & Entertainment: Two stocks poised to do well with the Digitization are Dish TV and Sun TV, both with experienced management and great content without a big threat from 4G and Mobile broadband yet.

This is not a bible but one of the Stock Selection Strategies for Beating Markets and maximizing Returns. Based on this you can start scanning for the next NIFTY Basket and make laugh your way to the Banks. Note:The Above Article is written on ideas borrowed from Ambit Capital’s Research and is not that of the Author.

Comments

2 Responses to “Which Indian Stocks to BUY for Long Term ? How to Choose ?”

  1. Garima Kalra on December 19th, 2012 12:08 PM

    I’ve been tracking Castrol and Bosch for a while now and I can’t help but think that these two are massively overweight. Jubilant too is pretty high at the moment. To share my strategy, I always look at large cap and quality midcaps with a focus on Nifty 50 companies. anyway I have a 5 year outlook so I couldnt care less about short term fluctuations in Nifty cos. Most of them will get returns in the long term! I use money works for me for analysis of Nifty 50 companies and so far it has served me well. What are your thoughts about the Castrol and Bosch. I’d like to know

  2. CP on December 28th, 2012 8:04 PM

    Historical Data Suggests 80% of the stocks entering the Nifty over a ten year period come from the 50 stocks just below the Nifty at the beginning of the decade. The NSE calls these 50 stocks the Nifty Junior. And Note that around the time of inclusion into the Nifty, almost all the outperformance in a stock (vis a vis the Nifty) comes in the years preceding its entry.

    Around exclusion from the Nifty, almost all the underperformance in a stock which is a Nifty constituent comes in the years preceding its Nifty exit. So weigh your strategy again or feel free to touch base with us on feedback at dalalstreet dot biz

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