Markets have rallied a bit in the last few days with banking stocks seeing an upsurge following the Reserve Bank of India's (RBI) decision to cut interest rates by 50 basis points.
A weaker than expected job number from the US, has pushed back expectations of a rate hike this year. This has led to an upsurge in equities across the globe.
Voltas is the leader in the air conditioning market on India. The company has grown its market share from nearly 7 per cent in 2002 to the current levels of more than 20 per cent. The company has a solid brand identity in the air conditioner business, with several innovative advertisements, which have paid dividends in growing market share.
The company recently ventured into the air cooler business with the launch in North India. Voltas expects to sell about 1 lakh air coolers. The company could break into the business of Symphony which presently enjoys a market share of almost 50 per cent in the aircooler segment.
Another positive for the stock of Voltas could be the fact that commodity prices have fallen sharply in the last few months. About 50 per cent of the weight of air-conditioner comprises metals like Aluminum and Copper. Prices of these metals have fallen dramatically in the last few months. This could help improve margins for the company.
Voltas currently trades at a price to earnings ratio of around 17 times, its projected EPS of Rs 17 for FY 2016-17. The company could be a good pick for the long term, especially if it is able to capture a significant portion of the air cooler market. Voltas is a good stock to buy at current levels.
Shares in HCL Tech have crashed 12 per cent from recent highs ever since the company sounded a tepid revenue warning and also announced margins could be hit because of cross currency headwinds.
However, this is likely to be more of a temporary problem rather then a problem with a downturn in the industry as a whole. The drop of almost 12-13 per cent from recent highs has given investors an opportunity to buy into the shares at lower levels. The fall in the share price of HCL Tech has made the shares trade at a price to earnings multiple of just 15 times estimated FY 2016-17. This makes it the most attractive long term stock to buy from the IT space.
ICICI Bank shares has seen a severe down slide in its share price from highs of Rs 383 to the current levels of Rs 280. The stock has fallen largely on heavy selling by foreign portfolio investors.
There are several things that could work well for ICICI Bank. One is that Reserve Bank of India has dropped interest rates or repo rates by more than 125 per cent basis points this year and there is scope for more rate cuts.
Second is that an uptick in credit demand could push growth rates to higher levels in the next few years. The stock is trading at a likely p/e multiple of just 12 times FY 2016-17 earnings. This is very low for India's largest private sector bank.
It's a good pick at the current levels and a good long term stock to own at the current levels.