Earnings are unlikely to pick up unless there is a meaningful recovery in the economy, but many stocks are available at attractive valuations which have sound fundamentals
There is one thing which is hard to come by nowadays and that is 'growth'. India's economy is going through a rough patch as GDP growth hit a 6-year low, and earnings from India Inc. aren't looking pretty either.
India Inc's net sales growth for the June quarter slid to 4.6 percent as against 13.5 percent for the same period last year, while the net profit growth moderated to 6.6 percent as compared to last year's 24.6 percent, according to a report by CARE Ratings.
The findings are based on an analysis of 2,976 companies which have reported their quarterly numbers by domestic rating agency.
It can be noted that GDP growth slid to a five-year low of 5.8 percent for the March quarter and hit over a 6-year low in June quarter at 5 percent.
Earnings are unlikely to pick up unless there is a meaningful recovery in the economy, but many stocks are available at attractive valuations which have sound fundamentals.
"The nervousness is in the undertone of the market capitulated by fear. We are no more in a trend where we can see a V-shaped recovery and the dip being bought quickly. It is a trend with investors focussed on quality now rather than going out in a passive way and taking a bet on any Nifty 50 stocks," Mustafa Nadeem CEO Epic Research told Moneycontrol.
"We have only a handful of stocks available as an option. Most stocks are below their long term moving averages, many are missing their earnings estimates. Only a few stocks are performing and for the rest, no one is concerned about," he said.
The June quarter GDP numbers indicate that India's growth has hit a wall. Economists and market observers attribute the slowdown to domestic as well as global factors.
The weak GDP number has prodded brokerages to take a relook at their outlook on growth and most of them have revised their projections downwards which means that earnings will also take time.
Japan's Nomura has lowered 2019 GDP growth projection to 5.7 percent year-on-year (YoY) against 6.2 percent earlier. For FY20, it cut the GDP growth forecast to 6 percent against 6.5 percent.
At a time when fear dominates the Street, it is time for long term investors to put their money to play and invest in quality companies with a time horizon of 5-10 years.
"It is true that the fall in markets has impacted the performance of many investors' portfolios. Since it is difficult to time markets, investors should rather focus on rebalancing the portfolio to benefit from the recovery in the long run," Ajit Mishra, Vice President Research, Religare Broking told Moneycontrol.
"We believe investors should stick to fundamentally stocks and average such stocks on dips. However, stocks with deteriorating fundamentals, high debt as well as corporate governance concerns should be exited. In short, the best approach is to stick to good names in your portfolio keeping in mind investment horizon of 3-5 years," he said.
We have collated a list from a filter of 'Growth 50' from MarketSmith which powered by William O'Neil. The list is algorithmically generated and contains top growth stocks in India, with strong fundamental and technical characteristics.
The list is based on Market Score strength. In a single letter-rating, investors can get the overall picture of fundamentals (EPS strength) and technicals (Relative Strength, Buyer Demand, etc.). In general, stocks with a Master Score of "B" and above are good for investing.