Porinju recommendation of stocks to buy now

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Pee Vee
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Porinju recommendation of stocks to buy now

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Porinju recommendation:
Reliance -20-25% upside
Lakshi Vilas Bank - holding PMS
Federal Bank
Parag Milk, Kwality - attractive valuadation

Porinju: Reliance may rise 20-25%; why investors must watch politics

Over the past few weeks, the Street has repaid investors’ faith with good up move. While Nifty and Sensex are close to all-time highs, the markets have been consolidating the past two years, with index-wise disproportionate returns, Porinju Veliyath, MD, Equity Intelligence India said.

Some stocks, such as Reliance Industries are coming out of that consolidation after a decade, he told CNBC-TV18 while asserting that Indian markets are at an “inflection point”.

Reliance Industries shares climbed a nearly 9-year high to Rs 1,253.45, surging 6 percent intraday Monday on the back of value buying. Strong rally helped it to cross Rs 4 lakh crore-mark in market recapitalisation, for the first time since January 18, 2008. Currently, it is the second highest valuable stock in market capitalisation terms after TCS that is valued at Rs 4.88 lakh crore.

Reliance stock gained nearly 17 percent in four consecutive sessions, especially after brokerages have given a thumbs up to Reliance Jio's new tariff plans and its announcement that it will start charging subscribers with effect from April 1, 2017.

Reliance Industries can still have an appreciation of 20-25 percent going forward on the back of futuristic businesses the company is getting into, Veliyath said. “Reliance can be a decent compounder from these levels,” he added.

In view of the state assembly elections, it would be “foolish” for long-time value investors to ignore politics, he said. “Politics is at inflection point as far as investors are concerned. The key word is development. For the first time, every political party has started talking about development and economic development for the first time. This can make a big change in the way politicians manage the economy,” he said.

Besides, Veliyath said that Indian households are under-invested in the equity markets. Recent government decisions should increase household participation in equity market, he said.

He is bullish on smaller private sector banks like Lakshmi Vilas Bank on the back of changes in the banking sector in the next 5-10 years. In the dairy sector, Parag Milk Foods is trading at attractive levels making it a good bet, he added.

Below is the verbatim transcript of Porinju Veliyath's interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.

Latha: We have seen some fairly significant gains coming in. Do you think the markets are now going to cross the all-time highs with ease? Is 2017 going to be a very profitable year for equity investors?

A: Of course we are almost at all-time high in Nifty and Sensex. It doesn’t make much difference to that but at the same time, markets have been consolidating in the last two years, did not give much return on indexwise though smart stock-pickers have been always making money and some stocks are coming out of that consolidation like Reliance after a decade is coming out of that cluster.

So I think it is very interesting inflection point again for the market but today I would like to discuss one thing that politics. Normally investors feel, it is not good or people in the market always avoid talking or discussing or taking a view on politics. I think it is foolish to ignore politics today by long time value investors. I am not talking about any political party or that kind of things but I feel politics and India is at an inflection point as far as investors are concerned -- inflection point in the sense in our key word is development. Every political party have started talking about development and economic progress for the first time. It is very interesting, this can make huge change to the way politicians in this country could manage economy going forward. That is very important.

That is another most bullish factor -- even small regional parties or caste and religion based parties, they also have started talking about developments. Development is taking the centre stage. If every state governments and the central governments start talking and doing the right things for developments, nobody can stop India. We are structurally so powerful and resourceful, we are heading for very much faster economic progress and that is the most important factor for equity investors.

Anuj: You spoke about inflection point for Reliance and the fact that last time you had told us that Reliance could well become the largest marketcap company, do you get a sense that it is still not too late to invest here and my second question, do you see this domestic liquidity continuing to support the market?

A: The domestic liquidity is yet to come. The Indian households are badly underinvested in equities as an asset class and there won't be any other countries of our size and the countries which matters in the global economic scenario with such a low equity penetration. The recent developments are the strong decisions from the government and difficult decisions from the government I would say, they all are going to help this significantly higher savings flowing into financial assets especially equities. I am very confident about that. Now we have systematic investment plan (SIP) kind of methods of investing is getting momentum, I think we have something like Rs 9,000-10,000 crore monthly SIP inflow as on today and can continue to grow.

All those things are very positive so this will do one thing to the stock market that the markets will continue to be expensive or richly valued, that is going to be the real outcome of all this money flowing into the market and that will eventually lead to much larger market capitalisation in a sustainable manner, there will be more capital flowing in, more growth oriented products coming up because India is a huge consumption story, nobody can stop that.

Latha: A little more on Reliance, you think that it has legs to run much faster this year itself?

A: It had done the fastest but I think it can have around 20-25 percent appreciation couple of month. I am very happy about that and it deserves it. The company used to have a lot of cash flows in the last 10 years and without any movement in the market capitalisation. So all those wealth created by the company in the last 10-12 years are there and it was sleeping now the investors are going to see the impact of those wealth created and the new ventures, the futuristic businesses this company is getting into. I think Reliance can be a decent compounder from these levels.

Anuj: Any midcap gems that you are looking at right now?

A: I was earlier also talking about some of the private sector banks, midcap banks -- earlier I was talking about Federal Bank that also moved up well. Lakshmi Vilas Bank is one stock, small investors can look for not for any large exposure because banking is undergoing through major changes, lot of uncertainties, it will not be smart enough to predict what will happen to the banks in the next five-ten years. It could be so dynamic.

I was looking at the dairy sector again, some of the stocks have come to a very reasonable attractive levels like Parag Milk, Kwality, there will be many companies in the sector because this is booming business and most of the businesses will be shifted to organised sector. That is where the listed companies are going to benefit. This is not only in the milk sector, the positive thing what investors should look out for today is that, which are the sectors or companies which are going to benefit because of the demonetisation and the kind of black to white theme, lot of unorganised businesses will be transferred to organised companies and businesses and the listed companies are the biggest beneficiaries.

Latha: Any disclosures on Parag, Kwality, LVB?

A: We are holding Lakshi Vilas Bank in portfolio management services (PMS), we have been recently buying it for some new clients coming in mind.

http://www.moneycontrol.com/news/market ... 59241.html
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