Raamdeo Agrawal, Joint Managing Director, Motilal Oswal Financial Services says stocks are available at dirt cheap valuation; but investors should be wise to pick companies with a sound track record. India's future is intact even though the global economy might take years to rebound, he adds.
On market sentiments:
The world will be a better place to live 5-10 years henceforth. There must be some problems with the models we followed in the last few years-the way we assumed leverage, the way financial systems were working, global imbalances.
I think a lot of imbalances have been created in the last 10 years so most likely the next 10 years will go in re-balancing the global economy.
In terms of imbalances, this might be history's worst time but the economy has moved forward and people’s understanding of global economy is much better. As an Indian, there is no reason to believe that five years henceforth, we would be worse off than what we are today.
The new game is that maybe the growth from Europe may not come. Domestic demand is likely to go up in China. There is a need for factories to re-orient their production for domestic and emerging markets.
So the new paradigm is to re-organise your business. Things will change. We should not completely give up on companies who cater to export markets.
Stocks that have margin of safety:
Top sectors:
Auto, banks - As recovery comes in, these sectors will do well.
Top picks:
1) HDFC Bank - Available at 20 P/E, valuations are cheap, its CMP might double in 3-4 years.
2) Nestle- More expensive company available at 40 times. Likely to grow at 20-25 per cent. Expect returns of 18-20 per cent
3) Cairn India: Largest onshore private oil firm. Tremendous future ahead.
4) Central Bank of India: Cheap bank but for people with strong heart. It has already lost 50 per cent. It is one of the largest bank with a balance sheet of Rs 2,00,000 crore available at Rs 6,000 crore.
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