Article

5 Stocks for This Year's Muhurat Trading

06 Nov 2018

Many investors are confused if they should play the market on the long side or on the short side during this Diwali’s Muhurat trading. We believe that playing on the long side is a better choice due to two reasons.

Firstly, Diwali is a festival of lights and optimism and the last thing you would want to do on the day is to initiate a short trade. Secondly, on 10 out of the last 12 occasions, the markets have ended in the positive territory during Muhurat trading hours on Diwali. Hence, it obviously makes more sense to play the market long, both sentimentally and empirically.

That brings us to the next question. Should we focus on large-cap stocks? Should we try to pick up beaten down mid-cap and small-cap stocks? Or should we take a multi-cap approach to trade this Diwali?

To be honest, there is a danger of getting straitjacketed to any single approach. Our logic is that you should just stick to stocks that give a semblance of value. In the next one year, the gap between the men and the boys in each sector will only get wider from here on. So play that game, more than anything else!

Here are five stocks that we have selected for this year’s Muhurat trading.

Greaves Cotton (CMP: Rs120)

Greaves has been a major player in the capital goods space in India and has a long and cherished track record of growth and delivering performance. With the Indian automobiles shifting to the BS-VI standards earlier than required, it opens up a big basket of opportunity for Greaves Cotton.

Going forward, growth in the automotive segment is expected to be driven by replacement demand emanating from the new BS-VI norms and the launch of BS-VI compliant ‘leap engine’.

Greaves Cotton has been growing its share both organically and inorganically. At a trailing P/E ratio of 14.44x, the stock is trading well below the peer group valuation and that should work in the stock’s favor.

HUDCO (CMP – Rs44.80)

After a strong debut post its IPO, the company came under pressure in-line with most of its peer NBF and housing finance companies. HUDCO has a natural advantage of being a predominant player in the low-cost housing segment, which happens to be a thrust area of the government. The government also sees this as a trillion-dollar-opportunity.

HUDCO is backed by the government and enjoys the highest credit rating, which helps it access low-cost funds. The company’s profits are expected to grow at 15%  CAGR (FY18-20E). Apart from its rich pedigree, HUDCO is also available at a P/E valuation of just 9.75x, nearly 1/4th the valuation of its peer group.

Muthoot Finance (CMP – Rs443.85)

Muthoot Finance has, for long, dominated the gold loan business in India. The stock was hit after the Kerala floods this year but its gold lending business continues to be robust. Assets under management (AUM) at Muthoot are expected to grow at 15% CAGR in the next three years on the back of strong gold prices.

Since the loan to value (LTV) is linked to the price of gold, rising gold prices would translate into more loans for each gram of gold and thus, an enhanced value of the collateral. Currently, Muthoot has gold holdings close to 172 ton and that is likely to grow in volume and value terms in the near future. At 9.38x, the stock is grossly underpriced compared to its peers in the industry.

Reliance Industries (CMP – Rs1,108)

While gross refining margins (GRMs) are down over the last few quarters, the petchem margins have helped RIL to hold on. Also, the Jio business continues to boom and is on track to have the largest number of subscribers in India over the next two years.

Although Jio’s ARPUs have fallen, it is still far better than the competition, giving RIL a unique edge when it comes to playing for market share. At 19.4x earnings, the P/E does leave a margin of safety considering that the company is on track to maintain growth.

Puravankara Ltd. (CMP – Rs72.50)

The stock has given up about 2/3rd of its value in the last few months after the NBFC crisis raised some uncomfortable questions for realty companies. However, at this price point, the margin of safety could be quite high for Puravankara. After all, it has an established presence in the residential segment comprising luxury and premium affordable housing projects.

The company also has a total saleable area of 73.41mn square feet, which includes ongoing projects of 18.17mn square feet, and land assets of 55.24mn square feet. Even in valuation terms, the stock looks reasonably priced.

Go bet on these stocks during this Diwali’s Muhurat trading and you could end up wiser and richer.

  • Responses
  • Patidar Samaj

    - 2 hrs ago

    This article claims RJio was given a "Backdoor Entry" into the 4G Based Voice Routing. The peculiar aspect is without the Voice License, Rjio would have been a mere ISP. With the license, it is now a holistic communications service provider, with ability to exponentially scale the bouquet of products. The events indicate it was meticulously planned way before the auctions because the auctions were clear on the agenda: 4G for internet only.

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5 Stocks for This Year's Muhurat Trading

06 Nov 2018

Many investors are confused if they should play the market on the long side or on the short side during this Diwali’s Muhurat trading. We believe that playing on the long side is a better choice due to two reasons.

Firstly, Diwali is a festival of lights and optimism and the last thing you would want to do on the day is to initiate a short trade. Secondly, on 10 out of the last 12 occasions, the markets have ended in the positive territory during Muhurat trading hours on Diwali. Hence, it obviously makes more sense to play the market long, both sentimentally and empirically.

That brings us to the next question. Should we focus on large-cap stocks? Should we try to pick up beaten down mid-cap and small-cap stocks? Or should we take a multi-cap approach to trade this Diwali?

To be honest, there is a danger of getting straitjacketed to any single approach. Our logic is that you should just stick to stocks that give a semblance of value. In the next one year, the gap between the men and the boys in each sector will only get wider from here on. So play that game, more than anything else!

Here are five stocks that we have selected for this year’s Muhurat trading.

Greaves Cotton (CMP: Rs120)

Greaves has been a major player in the capital goods space in India and has a long and cherished track record of growth and delivering performance. With the Indian automobiles shifting to the BS-VI standards earlier than required, it opens up a big basket of opportunity for Greaves Cotton.

Going forward, growth in the automotive segment is expected to be driven by replacement demand emanating from the new BS-VI norms and the launch of BS-VI compliant ‘leap engine’.

Greaves Cotton has been growing its share both organically and inorganically. At a trailing P/E ratio of 14.44x, the stock is trading well below the peer group valuation and that should work in the stock’s favor.

HUDCO (CMP – Rs44.80)

After a strong debut post its IPO, the company came under pressure in-line with most of its peer NBF and housing finance companies. HUDCO has a natural advantage of being a predominant player in the low-cost housing segment, which happens to be a thrust area of the government. The government also sees this as a trillion-dollar-opportunity.

HUDCO is backed by the government and enjoys the highest credit rating, which helps it access low-cost funds. The company’s profits are expected to grow at 15%  CAGR (FY18-20E). Apart from its rich pedigree, HUDCO is also available at a P/E valuation of just 9.75x, nearly 1/4th the valuation of its peer group.

Muthoot Finance (CMP – Rs443.85)

Muthoot Finance has, for long, dominated the gold loan business in India. The stock was hit after the Kerala floods this year but its gold lending business continues to be robust. Assets under management (AUM) at Muthoot are expected to grow at 15% CAGR in the next three years on the back of strong gold prices.

Since the loan to value (LTV) is linked to the price of gold, rising gold prices would translate into more loans for each gram of gold and thus, an enhanced value of the collateral. Currently, Muthoot has gold holdings close to 172 ton and that is likely to grow in volume and value terms in the near future. At 9.38x, the stock is grossly underpriced compared to its peers in the industry.

Reliance Industries (CMP – Rs1,108)

While gross refining margins (GRMs) are down over the last few quarters, the petchem margins have helped RIL to hold on. Also, the Jio business continues to boom and is on track to have the largest number of subscribers in India over the next two years.

Although Jio’s ARPUs have fallen, it is still far better than the competition, giving RIL a unique edge when it comes to playing for market share. At 19.4x earnings, the P/E does leave a margin of safety considering that the company is on track to maintain growth.

Puravankara Ltd. (CMP – Rs72.50)

The stock has given up about 2/3rd of its value in the last few months after the NBFC crisis raised some uncomfortable questions for realty companies. However, at this price point, the margin of safety could be quite high for Puravankara. After all, it has an established presence in the residential segment comprising luxury and premium affordable housing projects.

The company also has a total saleable area of 73.41mn square feet, which includes ongoing projects of 18.17mn square feet, and land assets of 55.24mn square feet. Even in valuation terms, the stock looks reasonably priced.

Go bet on these stocks during this Diwali’s Muhurat trading and you could end up wiser and richer.