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Caution advised as we approach D-Day Overall RATE RATE (0.00)

The beginning of the new financial year promises a roller coaster ride for the market. Besides the approaching general elections, the results season also kicks off with Infy all set to announce results today and as usual, the results are likely to beat expectations. Going forward, the big question is ‘how do we approach the market?’


To begin with, barring IT, pharma, to some extent FMCG, and all the other sectors have shown steep appreciation in the past 3-4 months. Banking and rate sensitives are showing a bounce back on the back of hopes that the worst is over on the rate front. Nevertheless, NPAs have bottomed out and the capital goods, infra pack, and cement have risen on the hopes that the new government would kick off investment in the infra sector, which would boost these sectors. Largely, the positives seem to be priced in and could warrant some profit-booking in the near term since most of these stocks look overbought technically as well.


The ACMIIL research desk has already brought out a report for part booking of select stocks in this scenario and readers are advised to refer to this report released on April 9, 2014 (last Wednesday). We advise investors to encash this dream run.


On IT and pharma front, after a good rise during July 13-Jan 14, they went into a correction mode mainly due to strengthening rupee from levels of 65 to around 60 in the past three months. Several such scrips now look attractive on the valuation front. Keep an eye for ACMIIL’s recommendations, especially for these sectors.


Happy divesting!!!


Written by : blog admin

Resounding victory raises high hopes on reforms Overall RATE RATE (5.00)

The Lok Sabha election results astounded the whole world, as the sweeping majority attained by BJP has scuttled the opposition benches to historically low figures. This raises hopes of the possible changes, which could signal a high growth path for the next few years. In this backdrop, one seriously needs to analyse the reforms undertaken by the Modi Govt in Gujarat, which seized the imagination of the voting public to hand over the ruling mandate to BJP at the Centre.


Following are some of the areas of reforms:




Contrary to popular belief that Modi was pro-industry, the policies in this sector dispel any doubts about his overall approach. More so, Agriculture is one of the pillars of Gujarat’s success due to the following reasons:

1. Reaching out invention to farmers by organizing Krishi Mahotsav, which connect him directly to agro scientists. in 2013 brought farmers across India together

2. Promotion of micro irrigations systems such as sprinklers and drip irrigation

3. Encouraging banks to lend money to farmers, which are to be farmer centric and crop centric. This reduced the role of private moneylenders and addressed issues such as farmer suicides

4. Agro universities encouraged for conducting research on increasing productivity

5. Organic farming encouraged, as it is the way forward

6. Called for 4-5 grassland zones to be identified in the country, which can help the farmers during drought or any other adverse condition   


All these above measures have ensured that Gujarat recorded the fastest growth in agriculture.


Roads, Power, and Water

Under a flagship scheme – Jyotigram Yojana, commissioned in 2006, the Gujarat government ensured 8 hours of electric supply for irrigation for all of Gujarat's 18,000 villages and round-the-clock domestic power supply that has covered up to 97 per cent of all villages. Good roads have enabled farmers with easy access to markets and resources to diversify into multi-cropping and dairy farming.

In the backdrop of these initiatives in Gujarat, suddenly, there seems to be possible solutions in the pipeline to the problem of inflation that the country is currently battling with, since the root of inflation has been food inflation, which has severe supply and logistic constraints that needs to be addressed urgently.



Land and incentives


One major aspect of physical infrastructure in Gujarat is the specific intervention by government for the industry. The state's consistent industrial growth has been largely due to government's policy of supporting big businesses through infrastructure and land availability.


The state also offers a significant advantage through privately run ports, which were liberalised right since 1995.


Replicating all the above at the national level would definitely be challenging but the decisive mandate that the party received will give it enough teeth to take some bold measures.


The stock market has already greeted this victory with a 7300 plus index, but given the high possibilities, the market could still have immense potential. Although an all-round participation is likely in the immediate short-term PSU banks, infra, and agri related companies, languishing PSUs, power, and related ancillaries could see some re-rating, which is already visible in the sharp rise in several of these shares.


Following are four such stocks we have identified to begin with, which we perceive possess high potential and many such stocks should follow.     


Hindustan Sanitary Ware (India), Ltd – growth acceleration likely


The company is a leader in India’s sanitary ware industry and ranks second in the container glass industry. Regular launching of new products in each segment and presence across the value chain and at all price points are the company’s hallmarks. Although the building products segment (BPS) has been doing well, the glass container segment (GCS) has been facing problems such as tough market conditions, high input cost, and overcapacity, which affect pricing power. Recent indication from the management suggests that operating margins for the BPS could go up by 150 bps in FY15 on the back of launch of premium products. The glass division could also reduce losses substantially and break even by the year-end on the back of improving offtake, cost cutting, and price increases. This could have a sharp positive impact on the bottom line for FY15. 

With the expected improvement in economy in the coming year, this stock could see further re-rating. A price target of Rs. 280 could be expected from current market price of Rs. 205.


Finolex Cables Ltd


Finolex Cables Ltd (FCL) is a leading manufacturer of electrical and telecommunication cables in India. In electrical cables, it has more than 10% market share. Almost 85% of FCL’s revenue comes from electrical segments (mostly B2B business). We expect recovery in infrastructure activities post general election with specific emphasis on the power sector, which would have positive impacts on the company’s growth.  The stock has already seen some interested buying in the past few months and the continued momentum could take the stock up to levels of 195.


Va Tech Wabag Ltd


Va Tech Wabag Ltd is a leading multinational player in the water treatment industry. The new government will have special focus on the water treatment industry at a time when our water resources are depleting rapidly. Measures such as rainwater harvesting, river linkages, water conservation, sewage treatment, and desalination projects will go a long way in tackling this looming problem. Hence, Va Tech Wabag would be the main beneficiary of this policy action. The company is in a niche segment where besides installation for big projects, it also derives large chunk of revenue from maintenance, which adds to its value immensely.


The scrip could be bought at every decline with a possible target of 1300.


Info Edge (India) Ltd


Info Edge India Ltd (Naukri), a leading Internet company, dominates the online recruitment market. Naukri.com’s traffic is more than twice that of other job sites. It has businesses in areas such as real estate (99acres), matrimony (jeevansaathi), and education (shiksha). Naukri.com’s owes its success to a mix of advertising and subscription-based revenue streams and a large customer base (~50,000 paid customers). Info Edge will benefit significantly from any improvement in economic growth, since higher economic growth will see hiring picking up. Turnaround in real estate activity will lead to material improvement in revenue growth and would drive margin expansion.


The scrip could be bought at current market price of 628 levels with a possible target of 800.


For more investment ideas and suitable portfolio for your risk profile send an email to retailresearch@acm.co.in.



Written By:

Equity Research Desk



Written by : blog admin

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