Markets have fallen to the lowest level since Narendra Modi took charge as the Prime Minister of the country in May 2014.
On Wednesday the Sensex comfortably slipped below the 24,000 mark, before ending slightly higher. Dealers are not sure if there is more carnage left. Oil and China will continue to weigh in sentiments.
However, if crude oil stays at these levels for long, sovereign wealth funds, who have heavy investment in equity markets throughout the globe will start dumping stocks and that could be catastrophic.
In any case here are a few stock ideas, that we believe could generate returns from a long term perspective:
Coal India shares slumped to a new 52-week low of Rs 292 on the National Stock Exchange. The stock has also hit a 52-week high of Rs 447.
The sharp fall in commodity prices is one reason for the sharp fall in the stock. However, we expect that the volume growth at Coal India, could to some extent offset a drop in prices. Coal India is a cash rich solid dividend paying company. In fact, the dividend yield on the stock is close to 7 per cent. This is also tax free, unlike bank interest income which is taxable.
Demand for Coal in India would continue to rise and with a decent capex plan, Coal India should do well in the coming days. The stock is trading at a p/e of 15 times and as mentioned earlier has a very high dividend payout.
A good stock to hold with a 2-3 year perspective in mind.
ICICI Bank like Coal India crashed to a new 52-week low of Rs 220 on the NSE. Banking stocks have been hammered out of shape in the recent carnage on worries of higher provisions and new guidelines by the RBI, would push NPAs higher. While this is true, the same may already have been factored in the stock price of most banks, including ICICI Bank.
The stock is trading at a p/e of just under 10 times one year forward earnings, which makes it very cheap.
The price to book at 1.6 times is also attractive. The bank has a significant holding in subsidiaries like ICICI Prudential Life, ICICI Direct etc. This itself has enormous value. The stock is a good bet from a 2-3 year investment perspective.