Top Picks for 2011

Experts list out the companies that are likely to do well this year and the reasons you would do well to pick them up.

Will commodities beat stocks this year?
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R Shree Ram        Print Edition: January 2011

Experts list out the companies that are likely to do well this year and the reasons you would do well to pick them up.

Wait for dips and invest in a staggered manner
Gagan Randev
Chief Executive Officer, Religare Securities

Private consumption is set to improve over the long term. It clocked a robust growth of 9.28 per cent in the second quarter of 2010-11 compared with 7.84 per cent in the first quarter. The phenomenal growth in sales of cars and consumer durables is a testimony to India's growing domestic demand.

The auto, pharma and metal sectors are seeing a growth in their top lines, while the banking sector is witnessing a high bottom line growth. The government has plans for the infrastructure and banking sectors and, hence, you should focus on these. The expansion in the power and the oil & gas sectors could also lead to topline growth. The telecom sector may not see higher earnings.

Always think of long-term gains and don't expect to double a stock's value in a month. Wait for dips and invest in a staggered manner. Focus on the infrastructure, banking and auto stocks.

GAIL
Rs 501.90
The company is expanding its pipeline network substantially-by another 6,600 km-within the next three years.
Exide
Rs 160.05
The continuous flow of demand and steady growth in the automobile sector has propelled its volumes, making it a good pick for 2011.
Sintex
Rs 181.65
Sintex's pre-fabricated building and construction material is in high demand for low-cost housing, rural schools and healthcare shelters.

In 2011, corporate performance will be driven by topline growth
Satish Menon
Director (Operations), Geojit BNP Paribas Financial Services

One should invest with a three- to five-year horizon. Emphasis should be on finding businesses which offer long-term benefits and have management teams that can deliver, even if the catalysts for outperformance are not readily apparent. Investors can benefit more from a stock's lifetime potential, rather than from short-term corrections.

Macro overlay suggests that corporate performance will be driven by a healthy topline growth of 18-20 per cent in 2011. Inflationary pressure could increase input costs, which are likely to be offset by improvement in capacity utilisation and higher efficiency. The only spoiler could be the rising crude oil prices. So, invest for the long-term.

BASF India
Rs 605.05
It's the prime vehicle for driving growth in India after having integrated its parent BASF Ag's operations.
CropScience
Rs 863.10
It's 71 per cent subsidiary of Bayer Ag, Germany, and market leader in growing domestic crop protection.
Eid Parry
Rs 498.55
The company is set to reap the benefit of better capacity utilisation built over the past 4-5 years.
Ingersoll Rand
Rs 446.15
A leader in air compressors, it aims to grow three times in four years and is cash-rich with the capacity to grow
The Sensex is expected to trade between 18,000 and 25,000
Manish Shah
Associate Director (Equities and Derivatives), Motilal Oswal Securities

India's GDP growth in 2009-10 was better than that of most countries. This was mainly because India's economy was driven by domestic consumption and was not led by export. The Sensex followed the fundamentals and it reached a high of 21,108 in November 2010, only to correct itself.

Growth in the first half of the financial year has been impressive at 8.9% and we could end with an annual GDP growth of around 9%. With a good monsoon, agriculture, which is a drag on the GDP, could register a growth in excess of 4%. The manufacturing and service sectors could register a growth of around 10%.

These results have been achieved by using unutilised capacities. Further growth would come from capex and the investment cycle in 2011. This, combined with an increase in sales from existing capacities, should see earnings go up by about 18% this year.

With the Sensex drifting to a level around its 200-day simple moving average of 18,400, one could expect the benchmark index to trade between 18,000 and 25,000 in 2011. The strategy would be to buy fundamentally good stocks during dips.

Bhel
Rs 2,318
Expect Bhel to retain over 55% of the market share in the 12th 5-year Plan despite new manufacturing capacity of 16 GW being added by other companies.
M&M
Rs 732.25
Several growth drivers for the company over the next 3-4 years, coupled with cheap valuations, make M&M one of our top bets in the auto sector.
Infosys
Rs 3,293.30
Infosys is one of the most profitable among the frontline Indian IT companies and offers services that have domain depth.
GAIL
Rs 501.90
GAIL is on its way to becoming a true utilities company. It will be one of the key beneficiaries of several gas finds in India in recent years.

It will be about investing in the right companies
Pallav Sinha
President and CEO, Fullerton Securities & Wealth Advisors

The investment strategy in 2010 was driven mainly by a top-down approach, where the right sector selection held the key. In 2011, it will be about selecting and investing in the right companies. We recommend a thematic approach built around the Indian growth story, comprising multiple themes, such as consumption, asset creation, financial inclusion and technology innovation.

Despite a rich valuation, specific large-cap stocks in high-growth sectors still hold the potential to deliver steady returns for the next 2-3 years. Mid-cap and small-cap stocks have had a good run, thus moderating the valuation differential with large caps. The recent emergence of corporate governance issue and tight funding related to mid-cap and small-cap companies strengthen the case for investing in large-cap frontline stocks.

The sectors that fit into the consumption theme are agriculture, FMCG, pharma, retail and automobiles. Some of our recommendations in the consumption theme are ITC, Cipla, Pantaloon Retail and Maruti Suzuki, which are leaders in their respective sectors. Banking and financial services sector is a good surrogate for capturing growth in the underlying economy.

SBI
Rs 2,696.05
The bank will maintain its leadership in the public-sector banking space, given the strong uptrend in NIIs. A strong diversified loan book portfolio will help sustain its market share.
NTPC
Rs 197.50
Greater efficiency, a regulated business model, strong capacity addition over the next three years present a strong outlook for NTPC. It is available at 12x one-year forward earnings.
Hindalco
Rs 224.25
A strong demand for aluminium in the domestic market, firm LME prices and a defensive business, in the form of Novelis, will benefit Hindalco in the long term.

All stock prices are BSE closing as on 16 December 2010.


WHAT 2011 HAS IN STORE FOR YOU
1. How 2011 will impact you

2. Buoyant market, bullish returns

3. A roller-coaster year ahead

4. Top stock picks for 2011

5. Tracking a positive theme

6. Retail investors should go global

7. Keep pace with changing times

8. Debt funds on solid ground

9. Make the best of uncertainty

10. All set for new, improved cover

11. 'New norms don't include incentives'

12. Invest in a house, cautiously

13. 'Teaser rates don't benefit anyone'

14. Supply crunch to push commodity prices

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