The steep fall in stock valuations, the day-to-day gyrations in the market and increased uncertainties globally, have all sent shivers down the spine of domestic investors, while largely keeping foreign investors at bay.
While there aren't any conclusive signs of market sentiments turning positive, the current scenario provides long-term investors the opportunity to take a plunge into the market and buy high-quality stocks at far cheaper valuations.
Although the current turmoil is more to do with global events and to some extent due to the fears pertaining to earnings slowdown, one can still pinpoint companies capable of delivering an earnings growth of 25-30 per cent annually for the next three years. In other words, their earnings should double over the same period.
While experts have always suggested investing in the domestic growth story including in sectors such as FMCG, retail, media, financial services (including banking), telecom, infrastructure and, oil and gas, the answer to superior returns lies in one's ability to pick the right stocks.
A good investment would ideally be a combination of robust fundamentals, sound promoter/management, market leadership in the business (preferred), healthy growth prospects, reasonable valuations and minimum downside risk, all of which put together should help achieve above-market returns.
The Smart Investor brings to you a few of such stocks, which with the exception Reliance Petroleum (due to no past track record as it is yet to commence operations), largely meet the criteria.
The current market turmoil is only making things more attractive. Even if the market goes for a toss, their relatively high-quality characteristics should act as a cushion.
Text: Priya Kansara
Image: A passer-by walks past the bronze statue of a bull outside the Bombay Stock Exchange. | Photograph: Sajjad Hussain/AFP/Getty Images
Also read: 8 key ratios for picking good stocks
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