The Nifty has fallen around 8 per cent, since hitting historic highs in the month of May. Among the several reasons for the fall is the imposition of tax surcharge on the super rich, which also becomes applicable to FPIs registered as trusts. One of the other reasons is the sharp slowdown in the economy, as indicated by falling auto sales.
Is is time to buy stocks?
While the Nifty has fallen only 8 per cent, it seems that the Nifty is at 9,000 points, the way the broader markets have fallen. Had it not been for select IT stocks and the HDFC twins, we would have seen a sharper fall in the markets.
Stocks on a more broad based levels are trading significantly lower, than even in the most bearish phase. It is a good time to accumulate some stocks that have fallen through the roof. These stocks can easily give you 50 per cent appreciation in the next two years. Some of them offer attractive dividend yield, while others are at ridiculously low price to earnings multiples.
Stocks that one can consider
There are quite a few stocks that are good for dividend yields and also look good in terms of price to earnings and price to book value. Take the example of IndiaBulls Housing Finance. We know that it has been in the news as there has been constant speculation about wrong doings, which have never been proved. The company declares a dividend of Rs 40 per share. Based on this dividend the yield works to 8.04 per cent. This is not bad at all.
Coal India too, if it can maintain its dividend will fetch a cool 7 per cent as dividends. Some of these stocks are good from a long-term perspective. TV Today is also a stock that we like at the current levels.
Could the markets drop further?
There is a high possibility that it does. However, we believe that from a 2-3 year perspective the markets could grow from here. In fact, at some stage economic growth would revive and the Nifty and the Sensex would be trading at much higher levels.
Many stocks are trading at multi-year lows and this maybe the right to bottom fish. The RBI is also expected to cut interest rates going forward, which could be another big positive.
It maybe a difficult time right now, but, who knows patience might pay-off in the more longer term.