HIGH FIVE

The emphatic victory of Narendra Modi led National Democratic Alliance in the general election has helped Indian equity markets to shed all inhibitions and the benchmark indices, Sensex and Nifty are trading at their new life time high and have gained 20 per cent till date. We at DSIJ have been among those rare optimists who stick our neck out and advised our readers to “Modi-fy your portfolio for 2014” six months back, way ahead of any other market participants.

 It was not a crystal gazing exercise based on some occult science, but was based on our experience of reading and correctly judging the impact of change in politico-economic factors on the stock market. Through our methodical research and reading of the trends correctly we gave an insight to our readers about the future course of market and provided them a portfolio of rupees one crore.

 The performance (See Table: Performance of Rs 1 Crore Portfolio For 2014) is nothing short of spectacular, our portfolio return is 35 per cent compared to frontline indices giving return of 20 per cent. It’s not only the stocks that we had recommended, our interaction with leading brokers also revealed how to realign and churn your portfolio. Infrastructure, capital goods, automobiles and metal stocks were the top picks and returns generated by these sectoral indices range between 35- 75 per cent.

 We believe that year 2014 will be a game changer for the equity markets and we are on cusp of multiyear bull rally. This augurs well for a long term investor who can reap handsome gain in next five years. Recent sharp run up in the stock and indices should not hold back investors from investing if they have longer term investment horizon of more than two years, as current rally is likely to continue for years.

 After recording a below five per cent GDP growth continuously in last two years, we believe the worst is behind us and the economy is poised to revive from FY15. The Indian economy is likely to grow at a rate of 5.5 per cent in FY15 and more than six per cent in the following year. This will lead to a revival in the earnings cycle.

 The consensus estimates shows that Sensex and Nifty earnings is estimated to grow at 15 per cent for FY15 and is likely to pick up pace considering the economy turnarounds and we start with a lower base. Although, it is premature to pass a judgement on the policy of new government, noises coming from the Delhi points towards earlier recovery of the capex cycle, which will boost the earnings growth.

 Beside this, we feel Reserve Bank of India has done with the tightening of the rate and going forward as inflation cools off , we may see easing of rate either in the last quarter of current year or in the first quarter of next year. Lower interest rate will lead to decline in cost of equity and we may see valuation multiples also being rerated upward. The combination of earnings revival along with the rerating of the multiples opens door of opportunities for equity investors to make exponential returns in next few years.

 To help our readers to make most of the opportunity, we are presenting you portfolio of five stocks for next five years. These stocks are likely to be multi-bagger and are best among their sectors and are going to be most benefited with the revival in the economy