Budget 2013 expectations and its implications on Indian economy and markets

Hello Readers,

  Mr.Chidabaram is coming with the last budget of the UPA-II government on 28^th Feb and he would be carrying a high burden of expectations from the investors, industrialists and common man. Whether he will be able to deliver for all would be something which everybody is waiting with held breath.

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My 2013 Forecast of Indian markets and Top 12 Stock picks

Hello readers,

 Wish you all a very happy and wealth generating New Year -2013.

 How Indian markets performed in 2012 vis-à-vis my 2012 Forecast:

Before we get into 2013, let’s look back and see how the Indian markets performed in 2012. The Sensex was up by 26% with respect to 2011 closing levels (from 15454 to 19426 levels). This was in line with my 2012 forecast (Pl refer my blog on 31st Dec 2011"My 2012 forecast and Top 10 stock picks) when I had predicted the Sensex to touch 20,000 by 2012 end. It almost touched and missed 20,000 by a mere 500 points (2.5%). The Indian Sensex did better than the world markets and US market(S&P 500 Index) and was one of the best performing markets, justifying my bullishness on Indian economy and market. The MSCI All-Country World Index of equities increased 16.9 percent in 2012 & S&P 500 Index increased by 13% in 2012, while Sensex increased by 26%.

How my 2012 portfolio performed(Top 10 stock picks) :

Pl refer to the same blog (dated 31^st Dec 2011) where I had mentioned my top 10 stock picks for 2012. In order to put my investment ideas to test, I invested in the same stocks in 2012 with great results (as shown below). My portfolio showed gains of 36% versus 26% of Sensex gains. I was more bullish on stocks like AXIS bank, BOB (Bank of Baroda), REC (Rural electricity Corp), BHEL, IDFC etc and hence put more money (higher weight) on them. The 4 top gainers were Axis bank (56%), IDFC (78%), REC (66%) and L&T(57%).The only 2 big disappointments were BHEL and GAIL . However, am still bullish on these 2 stocks and strongly think that market is being short sighted and not fully pricing their long term earnings potential and durable competitive advantages.  Hence I am going to hold them on for 2013 when they will show excellent gains.

2012 Portfolio results:

Company	Weight	Gain%
Axis	19%	56%	10.4%
BOB	15%	30%	4.6%
BHEL	14%	-3%	-0.4%
REC	13%	66%	8.7%
GAIL	10%	-6%	-0.6%
IDFC	9%	78%	7.2%
L&T	8%	57%	4.7%
Reliance	8%	18%	1.4%
Jain Irrigation	2%	-3%	-0.1%
Coromandel Int	2%	-14%	-0.3%
Total Gain%			36%

My 2013 forecast of the Indian markets:

Though I am a long term investor who focuses on long term trends and predictions of the economy/ market and the businesses, I would dare to venture into the medium term forecast again and predict that India economy and the markets are at the threshold of starting a big and long bull run.  The Sensex could be touching 24000 by Q2/Q3 of 2013 calendar year (16 X FY14 forward PE). This is about 25% gains from the current levels. This means that if we chose the right businesses/ companies (fundamentally strong businesses with competent management at attractive prices), we could potentially make 30-40% of returns in 2013. I am most bullish on interest rate sensitive sectors like Banking & Finance, Automobiles, capital goods/ infrastructure etc as they have been battered badly in recent times and will benefit from the Govt. policy reforms, investments and RBI impending actions on interest rate reduction .This market forecast might get battered only if we have sudden upheavals or catastrophic events like US fiscal cliff not getting resolved and US getting into recession or severe Euro sovereign default or Indian Govt falling etc. 

My 2013 Portfolio of Top12 business/ stock picks:-

I am going to retain many of the stock picks of 2012 while dropping 4 of them and adding 6 more new businesses/ stocks.

I am retaining BOB(Bank of Baroda), REC(Rural Electricity Corp), BHEL, GAIL , Jain Irrigation and Coromandel International while dropping Axis Bank, L&T, IDFC and Reliance. These 4 dropped businesses/ stocks are still great businesses/ companies but they are no longer available at great prices which can provide enough margin of safety and returns for me. In case they drop by 20-25% anytime, I will invest in them again. Apart from these businesses, I will add 6 more businesses as they are best in class in their sectors with great financials, business growth track records, excellent ROE, strong balance sheets with very competent management available at attractive prices. They are ICICI bank, M&M, Bajaj Finance, LIC Housing Finance, LUPIN (pharma) and Power Grid.

The final 2013 portfolio looks like the below

Businesses/Stocks                           Sector

1)   ICICI bank                                   Banking & Finance

2)   BOB                                            Banking & Finance

3)   Bajaj Finance                              Banking & Finance/Retail

4)   REC                                            Power

5)   Power Grid                                  Power

6)   BHEL                                          Capital Goods

7)   M&M                                           Auto

8)   GAIL                                            Energy

9)   LUPIN                                         Pharma

    10) LIC Housing Finance                 Construction/ Real estate

    11) Jain irrigation                             Agriculture

    12) Coromandel International          Agriculture/ Fertilizers

 

All these players are dominant or big players in their sectors with consistent growth and profit performance, robust business models, well managed companies by competent management teams & strong balance sheets with sustainable competitive advantages in their areas. And they are available at attractive prices now with respect to their intrinsic value & historic PE, providing a great "margin of safety" for the value investors.

Wish you a very happy New Year again and Happy investing,

Cheers

Amar

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Foundations of the great Indian Bull run are being laid now

 Hello readers,

I continue to be a big and unabashed fan of the long and medium term potential of Indian economy to beat all the other nations hands down in the coming few decades , despite our political leadership and bureaucracy. 

As we speak the foundations of the great Indian Bull run are being laid now in our economy and markets. Where in the world do we find so many bullish factors together- Demographic dividends(the fact that Indian population is and would be the youngest for many decades), huge local entrepreneurship talent  , English language capabilities, very high savings and investment rates(34-38% of GDP), growing consumerism , huge middle class etc. These factors  would ensure that we will continue to grow at an average growth rate of 8% for a few decades, which will translate into nominal growth rate(real growth rate + inflation) of 14-15%(assuming 6-7% of inflation). This in turn would ensure that the Indian economy would double up every 5-6 years (@12-14% Compounded Annual Growth rate(CA GR) for next 2 decades. This will make the Indian economy a $20 Trillion by 2030 (>10 times the current size and bigger than current US economy size@$15 Trillion). These numbers and trends are almost unanimously agreed now by various studies of the big banks as well as international agencies.

Though I am a long term investor who focuses on long term trends/ predictions of the economy/ market and the businesses, I would dare to venture into the medium term forecast now and predict that India economy and the markets are at the threshold of starting a big and long bull run.  The Sensex could be touching 24000 by Q2/Q3 of 2013 calendar year (16 X FY14 forward PE). This is about 25% gains from the current levels. This means that if we chose the right businesses/ companies (fundamentally strong businesses with competent management at attractive prices), we could potentially make 35-40% of returns in 2013. This market forecast might get battered only if we have sudden upheavals or catastrophic events like US fiscal cliff not getting resolved and US getting into recession or  severe Euro sovereign default or Indian Govt falling etc. 

The current economic woes of low growth rate(5.5% growth) , high inflation etc are not going to last long with Indian Govt. desperately trying to re-start the economic engine by policy and legislative reforms and trying to cut the fiscal and current deficit. With this, the “best of class” businesses in India , especially in rate sensitive sectors who have been badly beaten down  in last 2 years (like banking and finance , automobiles, capital goods, infra, etc) will do very well in terms of earnings growth. Certain businesses in domestic market centric sectors like retail , pharma and energy will do very well too. Most of my investing companies/ business , like the ones mentioned in my 2012 forecast article(published on 31^st Dec 2011) are from these sectors(the best and bigger ones among the sectors). They have already given me 30% YTD returns which is not bad, considering the uncertain environment domestically and internationally.

The secret behind making money in next 2 decades in simple. Select the best few among the fundamentally sound and long term potential companies/ businesses (10-15 companies/ businesses) with durable competitive advantages, aligned to the India growth story, run by competent and trustworthy management and available at attractive prices. Keep on investing in them in every significant price dips so that you could create a market beating and low risk portfolio. Another key secret would be to do your own homework and not depend upon the market intermediaries/ brokers’ for their advises. Lastly, play among the large caps(> $2 Billion or Rs 10,000 crore of market cap/ turnover) as they have the potential to weather economic storms and sail through market tempests.

Happy investing .

Cheers

Amardeep

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Never give up on India growth Story

Friends,

  Am blogging after a long time . I promise to be more regular, at least once a month.  This time , I am going to devote some time on the India growth story which everybody including the big investment banks, FIIs , and our own domestic industrialists in their wisdom had almost given up.

I would refer you back to a blog I had written on 25th June 2011 on the topic

"Biggest growth story of the 21st century - Indian economy"

Here is the link :http://www.indiavalueinvesting.blogspot.in/2011/06/biggest-growth-story-of-21st-century.html

I  had clearly talked about why and how Indian economy is the biggest growth story of the 21st century just like how the US economy was the biggest growth story of 20th century. I talked about how and when the Indian economy is going to become the biggest economy by 2050(as per the projections of leading Investment banks and US Govt) .And how we can create huge wealth for us and our coming generations  in the next 40 years by investing in strong businesses with competent managements in India.

I still stick to my projections, forecast and advise . Never give up on India growth story . India will be the biggest growth story , despite our government and political leadership. There are many strong factors like Demographic dividends(the fact that Indian population is and would be the youngest for many decades), huge local entrepreneurship talent  , English language capabilities, very high savings and investment rates(34-38% of GDP), growing consumerism , huge middle class etc would ensure that we will continue to grow at an average growth rate of 8% for a few decades. This would translate into nominal growth rate(real growth rate + inflation) of 14-15%(assuming 6-7% of inflation) . This in turn would translate into about 20% sustainable growth rate for the best in class blue chip companies.

Do you know what can the magic of compounding(compound interest) do to your money growing at 20% in 10, 20 , 30 and 40 years?  Your I lac INR can become 40 Lacs in 20 years, 250 Lacs(2.5 crore) in 30 years and 1500 Lac(15 Crore) in 40 years. Remember ,Time in the market is always more important than timing the market . Right business/ stock selection and Right temperament( patience and conviction on your choice) are the biggest success factors here. Warren Buffet became a billionaire after 50 years of patient investing and not overnight.

In December 2011 and Jan 2012 , I discussed my top 10 business or stock pics with you . Those stocks have grown by 30% Year till date while sensex has grown by 21% Year till date with 3 more months remaining for the year . This is not a bad return for a volatile year like 2012 with so much of global and domestic crisis. I never gave up on India story . In fact , all these months , I steadily built up my investments in these businesses with every dip in the market. Remember that the market always over-reacts on both the sides for good news as well as bad news . We need to exploit the over-reactive and short sighted nature of the market and invest in strong businesses which get painted by the same brush of macro bad news though their specific or micro fundamentals don't go through any significant or lasting change. I have continued to invest in strong but beaten down businesses/ stocks like Axis Bank , Bank of Baroda, BHEL, L&T, Rural Electric Corporation, IDFC , M&M, GAIL etc with every opportunity presented by market or stock dips. Once you have invested in these great businesses with durable competitive advantages or economic moat (as Warren Buffet would put it), just shut your ears from the market noise and allow the earnings growth and time to take care of your money .Thats the biggest secret of success of all the great investors, especially value investors of the world.

Happy Investing . Cheers for the sustainable Indian growth story.

Amardeep

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Indian economy at cross roads -Time to bottomfish??

Indian economy is at cross roads today when its suddenly being compared with 1991 situation when India had to pledge Gold to borrow foreign exchange. The GDP growth rates have dipped down to 5.3% (the lowest rate in last 9 years) with high inflation rates at 7.4% , raising an unprecedented  spectre of stagflation in India. The current account rate is at 4% which has been one of the highest ever and Rupee has depreciated by > 10% in the year.

Why and how did we reach this situation? Should we "blame it on Rio" as the govt. is attempting to do by blaming Greece and Euro debt crisis? I  think that most of the causes start and stop at our doors . RBI's aggressive monetary tightening stance , Policy and reform paralysis of the govt., lack of proactive managemnt of fiscal and current account deficits, stubborn inflation are the key domestic reasons for the current economical situation . These domestic factors along with Euro debt crisis led to foreign investors turning risk averse and withdrawing their hot money to safer heavens which in turn led to stock markets crash as well as currency depreciation.

Should we invest in these times in Indian markets? Responses to the below questions would help us get clear answers to the question.

Are these root causes of the current situation temporary or structural in nature?
They are temporary in nature

Are the consequences or implications of these causes predictable & controllable?
The consequences of all the mentioned causes are predictable and controllable except the scenario of a disorderly Greece Exit from Euro-zone which can lead to a contagion on other PIIGS govt bonds and run on banks. Hopefully , it wont happen.

Is there any permanent dent in the Indian long term growth story? Not at all . The Indian Tiger has been freed and it will run fast irrespective of the governments. Indian growth story will continue to remain the key story of the 21st century.

Have we bottomed out or near the bottom in economical cycle?
We have nearly bottomed out as far as domestic factors are concerned. In case of Greece dis-orderly exit , we may go down by 10% or more . However its impossible to time the market and hence its still good time to invest.

Is this time to bottomfish?
Yes it is. Go for the fundamentally strong and profitable businesses with great management and strong balancesheets, available at attractive prices. The valuations/ prices of some of these businesses are very lucrative today and we can start buying them in installments at every dip for the next few months.

What are few of the sectors and stocks to watch out or invest?
My favourite sectors are the badly beaten down sectors like interest rate sensitive sectors , e.g.Banking and Finance, Auto, capital goods , infrastucture etc. In these sectors , one ought to chose the best of the breed businesses with strong business and financial track record, revenue visibility, strong balance sheets and competent managements. Some of these companies are the same ones I had called out in blog titled "my 2012 forecast and Top 10 stocks " . The key ones I would put my money right now are businesses like "Axis bank", "Bank of Baroda", "M&M", "BHEL", "L&T", "REC" and "GAIL".

The times ahead could be more troublesome with markets dipping by another 10%-15% if we have the Greece and Euro debt crisis going out of control. Hence we should be buying these businesses in installments at every dip in next few months , rather than putting all money in one go.

Keep your conviction on the Indian long term story and invest for long term.

Happy investing!

cheers
Amar

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Budget 2012 and implications on markets

  2012 Budget has come and gone as an non-event this Friday(16th March). And so has the critical RBI policy announcement a day earlier on 15th March and critical state elections results including UP elections. 

One interesting fact is that market had been anxiously waiting for these 3 events as  major positive / negative triggers for deciding the direction of the market this year.All these events came out with results which were negaitive to the market. While the budget was hailed as disappointing and non-reformist by most of the experts and analysts, RBI ended up not reducing the repo rates. The ruling UPA dispensation(mainly Congress) ended up as poor losers in the critical UP elections.Yet, the market(sensex) didnt tank in . It barely lost 3%(about 500 points) inspite negative results for all the 3 events. What does it tell us about the state of the market and economy?

Well , it tells us that the market didn't have very high hopes from the budget and RBI policy and had already priced in negative results. It also tells that market is building a strong launchpad for a new bull market and is not going to be easily shaken by these so called "big" triggers. It also tells that the state and fundamentals of macro economy is improving and Indian economy is getting into high growth path again . Thats a good news for retail investors like us.

Having said that , lets briefly talk about the positive and negatives of the budget. Following are my thoughts..

Negatives:-

•  The fisal consolidation - FY12 turned out to be a very bad year on fiscal deficit with 5.9% and FY13 seems to be no better as the projections of 5.1% deficit is not based on reliable and credible assumptions. This will lead to Govt. continuing to borrow heavily from the market , crowding out private borrowings as well as hardening  interest rates which in turn will not give RBI legspace to cut market rates enough
• "Tax and spend budget"- Govt. has increased the indirect taxes(excise and service tax) from 10% to 12% which can stoke inflation . While it has increased the taxes , it has done little to control its wasteful expenditures like subsidy etc. While it gave away some Income tax reduction, it was too meagre.
• Non-reformist budget -  It doesnt contain any new or big idea like FDI proposals on retail, insurance or pension or clear timelines for GST and DTC rollout or General amnesty scheme for foreign/ domestic located blackmoney.
• Retrospective amendment in law to reopen vodafone and related cases- This has been hailed as anti-FDI move which will dent the foreign investor confidence and faith in Indian system.

 Positives :-

• Power & roadways sector - Lots of good measures have been declared for power sector including exemption of power fuels(coal/LNG) from import duty, allowing cheaper foreign loans(ECB) access to refinance domestic loans, extending tax holiday for one more year. On Roads, NHAI road targets have been increased by 20% and acesss has been given for ECB funds
• Agriculture/ rural - Agricultural credit has been increased to more than >500,000 crores($100 Billion) and agriculture loan interest has been reduced . This should increase the demand for agriculture related products.  Irrigation outlay has been increased by 14% to >14000 crore. Sops have been given for fertilizer production, warehousing and rural infrastructure too
• Direct transfer of subsidies and NREGA payments in 50 districts through aadhar/UDAI  cards - Govt has supported UDAI project with sanction of aadhar cards for another 40 crore cards and has sanctioned payment of subsidies in 50 districts which will be ramped up to other districts. This is a very good medium term action as this will help in stamping out leakage and corruption.

In summary , the budget was dissappointing and an opportunity foregone to make a great impact to the Indian economy story and change the course of events . Now its on the corporate world to make the best of the situation and some positive budget provisions to improve their micro fundamentals. RBI definitely will be constrained to reduce the rates in a significant manner which is a negative for the market and corporate sentiments. Increased crude oil rates because of the geo-political tensions in gulf and Iran can be another negative for the market and economy.

Now onwards,  the market will not have any significant domestic triggers to take direction . It will take its own direction based primarily on the corporate India performance in the next  few quarters and global liquidity situation. I still continue to be positive about the market and economy in 2012 , though we have lost a  very good opportunity to kick start the economy and take the economy and markets to new highs.

  The fact that the markets have taken all the blows in a defiant manner shows that the foundation  of the  bull market  is much more robust now and we are on a strong wicket to achieve new highs , though the speed and momentum will be a bit slower now.

Happy investing and cheers
Amardeep

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What's in store for 2012?

       I had predicted a good year for equities in my forecast for 2012(published on 31st dec 2011) with sensex going to the levels of 20000 to 21000 by the end of the year.I also had predicted that some strong businesses(My top 10 stock picks in the same blog) in specific sectors like Banking&Finance,    power,infra and energy will do very well in 2012 and ahead . Both my forecasts have proved to be accurate till now ,though the bigger part of the year is still to unfold. 2012 has seen an eventful and dramatic start till now with Market index(sensex) showing a sharp gain of 14 percent in first 6 weeks of the year.  While the Market index has gained by 14 percent, my recommended 10 stock picks have gained by 21 percent in the first 6 weeks of the year.This is a handsome gain by any standards and is 1.5 times the gain by Market index.

      My forecasts were based on the simple fact that most of the negative news at the domestic and global level were also ready discounted in the Market prices like inflation, interest rates, policy paralysis, fiscal deficit at local level and US economy slow down, Euro recession & Euro sovereign debt crisis  at global level. The only factor it had not discounted was a disorderly default by Greece or Italy(Market can never discount such catastrophic events).In fact, Market had typically overreacted on certain issues due to it's inherent shortsightedness and myopic mindset.Indian Market index was quoting at forward PE multiples of 12 to 13 with respect to it's historic average of 16 .Many strong business were being quoted at very attractive prices as they had been hammered down by a brutal market due to macro economic concerns and FII money flocking to safer heavens.It's this overreaction due to it's shortsighted myopic mindset that has been traditionally exploited by legendary value investors like Warren Buffet, Benjamin Graham, Philip Fisher, John Templeton to create their huge wealth.

     The fact that my recommended portfolio of 10 stocks have gained 1.5 times the market index  is not to claim any win as the year has just started. But this definitely reinforces that we don't have to invest in high risk and high beta mid cap and low cap stocks to make decent gains and beat the Market.You can do so by investing in safe and strong blue chip businesses/stocks. The market and broker driven myth of "high risk and high gains" is a facade which has been created to lure retail investors like us to bet for risky stocks and lose our entire money.This myth has been broken time and again by legendary value investors I have referred earlier too. There is no quick way of making millions overnight in stock Market but many quick ways of losing your entire money if you don't play it safe and long term.

      Let's talk about how remaining part of 2012 is going to pan out. Here is my 2 cents ,though it's always risky to predict Market movements in short term.The rally till now has been driven primarily by 2 factors - global liquidity and hope for better local action at fiscal, monetary and policy level. As we speak ,global markets have been swamped by a big wave of liquidity driven by ECB, Bank of England and Fed pumping billions of dollars in last few months.ECB has pumped about 490 billion euros in recent weeks by extending short term loans to euro banks.Its planning to inject a trillion dollars more in near future. Some of this global money has come to the Indian markets through FII money(4 billion dollars in 6 weeks).There is also some hope that we will see some action at govt policy and interest rates. These factors have led to this sharp rally.

      Is this rally sustainable? The answer is both yes and no. It depends on how certain factors play out. These factors are mainly on what and how govt does on fiscal deficit front and policy/reforms front.It also depends upon what RBI does on the interest rate front.It also depends upon how the congress does in the recent state elections as good performance will strengthen Govt hands for doing reforms.Hence the govt and RBI have their tasks cut out for them in 2012 and ahead. They can't take robust economy growth for granted as it has already come down to 6.9 percent. However, am positive and hopeful after seeing recent trends on  inflation reduction, monetary actions by RBI on liquidity front and recent Govt urgency on power sector recovery.If these recent trends continue to exist in the balance part of the year, we should see a good and positive 2012.

I am signing off with this positive note. Happy and safe investing.

Cheers
Amardeep

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My 2012 forecast of Indian market & Top Ten stock picks

 Wish you all a very happy and wealth generating new year -2012.


2011 will definitely be remembered as one of the  forgettables years  for the Global stock markets as far as investment returns are concerned. While the US markets closed virtually unchanged with respect to 2010 closing level(0.4% down), Europe market closed at 12% down (STOXX Europe 600 index).Indian market was the worst performer among the major markets with Sensex down by 25%. A combination of domestic factors like high inflation and interest rates, slowing indian economy, Govt. policy paralysis,  high fiscal/ current deficit along with global headwinds like Euro debt crisis and US slowdown led to withdrawl of invested funds by FIIs leading to a bear market in India.


The Million Dollar question in all investors mind is "what is in store for 2012?”. It’s always very difficult to predict the short and medium trends in the market. However , taking into consideration all the factors and issues playing in 2011, I would like to put my bet on a positive 2012.


2012 should be a brighter and better year because of couple of reasons. Almost all the bad factors - global and domestic - have been already factored into the prices and hence market should start looking up by end of Q1. Inflation has already started coming down with food and primary articles inflation showing <6%. Interest rate cycle has already peaked with RBI showing signs to cut down the rates in near future. Govt. has started to move on reforms/policy, though the attempts on Retail FDI and Lokpal - didn’t produce positive results. Euro crisis will continue in 2012 with Europe going into a recession, though the immediate threats of sovereign defaults have blown away due to some recent actions and agreements like higher emergency funds for IMF and Europe Financial Stability fund and agreement on better fiscal controls in Europe. US economy is showing its inherent strength lately by bouncing back in the last quarter when it showed 3% growth with respect to 0.9% growth in first half of 2011. The unemployment rate has come down to 8.6%(lowest in last 3 years) and job market as well as housing market is looking up after a long time. The only event the market has not factored is a potential sovereign default in Europe in one of the PIIGS nations. Any market can’t factor such kind of catastrophe event anyway.


One should use these times of fear and uncertainty to invest in staggered manner with every fall in the market in the next few months to build up a long term portfolio of strong businesses at discounted prices. The market prices for most of the blue chip stocks/ businesses are attractive and are available at good  “margin of safety” to their intrinsic values. The sensex companies are available at an average of forward PE of 13 to 2012 earnings estimates and forward PE(Price Earning multiple) of 11 to 2013 earnings estimates. The average forward PE historically has been 16 for Indian market in last 2 decades. Unless we don’t have any catastrophical events in 2012, we should see sensex reaching levels of >20,000 by end of 2012, assuming forward PE of 15(>30% returns on the current levels). These investments should be made only with a horizon of  atleast 3 years so that we will get handsome returns of >20-30% annualized.

Next big question is which stocks to invest in 2012?

 I would stick to the same list of stocks which I had advocated in my last blog “Time to invest and build long term portfolio”. I  would recommend these stocks/ businesses( using my "Hi-Five principles/framework mentioned in one of my prior blogs)  in the high potential sectors of Banking & Finance, Infrastructure, Power, Energy and Agriculture/ rural plays.

Banking and Finance space - This has faced the brunt of market reaction and fear recently and hence have some solid buying opportunities.  With RBI indicating the end of interest rate cycle, Banking and finance sector will be the first to start rising. Bank of Baroda and Axis Bank are very attractively placed now.  Consistent performers with > 20% ROE and >25% growth rate in last 5 years with very attractive prices/ PEs. The NPA(net performing asset ratio) is <1%

 Infrastructure space -  L&T and IDFC - Solid and consistent performers with very attractive prices/ PEs. These businesses are the best proxies to India infrastructure story with solid growth track record and strong balance sheet and excellent revenue visibility of >2-3 years(L&T has order book of > 3 years of current revenue; > $25 Billion order book size.


Capital equipments/ Power space - BHEL and REC(Rural Electric Corporations) . Very strong performers with consistent growth track records(>20% CAGR) and >20% ROE . BHEL has strong balance sheet(almost debt free) and big order book( equal to almost 4 times current year revenue).  REC is very strong player in power finance and has monopoly in rural power programs . You could also consider Power Grid which has huge expansion plans with virtual monopoly in transmission sector


Energy space - GAIL and Reliance Industries . GAIL has huge pipeline expansion plans with strong performance and balance sheet . Virtual monopoly on gas transmission. Entering into profitable city gas distribution in a big way.  Reliance has been an underperformer for some time which makes it attractive as all the negatives have already factored in the price(<750) and it has huge cash surplus of $13 Billion which could be deployed productively.


Agriculture & rural space -   This sector is looking up due to big govt. planned expenditure on rural and irrigation space as well as potentially high growth rates in rural and agricultural economy. Jain Irrigation and Coromandel International are very strong businesses with attractive prices and long term growth potentials. While Jain irrigation is the market leader in micro-irrigation , Coromandel is the market leader in complex fertilizers and special nutrients. Both have shown high ROE as well as EPS growth rates of >25% for the last 5 years with manageable debts. Both of them  have corrected to attractive levels in recent times.


All these players are dominant or big players in their sectors with consistent growth and profit performance, robust business models, well managed companies by competent management teams & strong balance sheets with sustainable competitive advantages in their areas. And they are available at great prices now with respect to their intrinsic value or historic PE, providing a great "margin of safety" for the value investors.

Wish you a very happy New Year again  and Happy investing,

Cheers

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