Six Investment Ideas for 2012 - Fairwealth Securities Ltd

Year 2011 has witnessed turbulent time for the global markets and the Indian Financial System also felt the heat in the face of fragilities being observed in the global macro financial environment. Slackening growth in most parts of the world, risks from global imbalances and sovereign debt crisis in Europe continue to hover. Recent developments in the global markets have forced us to think about the outlook of Indian economy for coming years.

Slowing GDP growth, slackened industrial growth, higher interest rates driven by sticky & stubborn Inflation, widening trade deficit and so current account deficit, dried foreign flows etc are proved as the major dampeners for Indian economy.

With the expected southward movement in WPI inflation in coming months, we do not expect any further hike in key policy rates by RBI in last leg of FY12. We expect interest rates to come down from H1FY13 which would make conditions attractive for Indian Equity markets. First half of 2012 will be highly dependent on major events such as Union Budget 2012-2013, Assembly Election, RBI's Monetary Policy for FY13 etc which will decide the movement of the Indian Equity Markets. In addition to this, steps towards structural reforms, pending bills such as GST, Lokpall Bill, Companies Bill 2011, Mines and Minerals Bill 2011 etc will also have major impact on earnings of India Inc.

With the ongoing global panic, does India contain the ability to stand out and dazzle? This question has caused anxiety directly or indirectly to the financial system and forced everybody to analyze the macro and micro environment. In this regard, we believe that though global developments are not in the hands of India but slowing domestic growth is within the reach of policy makers. We feel that (1) reviving investments by resolving mining, power and land issues, (2) Fiscal consolidation (3) Disinvestment program (4) Managing Inflation and growth scenario (5) resolving policy paralysis (6) Balanced Infrastructure growth etc are the major areas to work upon to revitalize Indian Economy in 2012.

With goodbye to the year 2011, we have picked few growth and momentum stocks to welcome the year 2012 which we feel, should be the part of your investment portfolio.

INVESTMENT IDEAS FOR 2012

Company	CMP	TP	Potential Upside
Axis bank Ltd	806	1350	65%
Ashok Leyland	23	32	39%
Bajaj Electricals	154	241	56%
KPIT Cummins	146	185	27%
Jindal Steel	453	640	41%
Shasun Pharma	46	90	95%

AXIS BANK LTD

Axis is among our preferred picks in the banking sector due to its strong deposit franchise, healthy growth-return profile, and relative discount to peers. Concerns over asset quality of the bank largely discounted in the current market price and stock is currently available at a significant discount to its historical average. Currently the stock is trading at 1.7x FY11 P/BV. Hence, we recommend Buy on Axis Bank with medium to long term horizon with the target price of Rs. 1350.

ASHOK LEYLAND

We expect demand to revive from CY12 with the likely easing of interest rates, thereby helping AL to post robust volume growth in FY13E. At CMP, AL is trading at 9.5x its FY2011 earnings. We recommend BUY with a target price of Rs. 32 for a potential upside of 39%.

BAJAJ ELECTRICALS LTD

At the CMP, BEL trades at a P/E and EV/EBIDTA of 9.6x and 5.5x, discounting its FY12E numbers. Based on increasing share of consumer segment, higher cash flows and strong growth prospects, value the company at 11x FY13E EPS and arrive at a target price of Rs.241. We recommend BUY.

KPIT CUMMINS

The stock is currently trading at 13.5x FY11P/E which appears to be cheap. We assign BUY rating to the stock with a target price of Rs.185 indicating potential upside of 27% from current levels.

JINDAL STEEL & POWER LTD

Amidst rising coal supply insecurity in India, the company stands out as one of few companies having captive coal resources. We believe the integrated status of the company ensures it would generate better returns than the regulated players in the power segment. The sock is currently trading at very attractive valuations of 11.3xFY11P/E. We recommend BUY with a target price of Rs 640 which is a price appreciation of 41% from CMP.

SHASUN PHARMA

The stock has come under pressure due to steep rupee depreciation which would lead to Market to market losses on company's forward contract We believe going forward the company is a candidate for re-rating due to high potential growth with majority of earning accruing from UK subsidiary. At the CMP the stock is trading at 8.4x for FY11P/E. We recommend BUY with a target price of Rs 90.

Source : Equity Bulls

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