Waiting for market revival? SIPs in these 12 stocks can deliver big

A significant drop in the broader equity market amid the ongoing US-China trade tensions and slowdown in the economy have raised fear among investors. At the same time, market mavens are advising investors to start accumulating stocks of good businesses with the objective of creating wealth over the long term.

Like SIPs in mutual funds, equity investors can also use the systematic investment route during uncertain times to beat market volatility. The purpose of SIP is to create long-term wealth by investing in a disciplined way.

Mutual funds are always there for such systematic planning, but if you don’t want to go for the entire basket of a mutual fund portfolio and instead focus on a few high conviction ideas, systematic equity planning (SEP) in direct equities can help.

“It is a good opportunity for investors to go for an SIP approach as one can get more mutual fund units or stocks now compared with when the market is higher. Therefore, a prudent approach would be to continue with SIP in stocks,” said Ajit Mishra, VP Research, Religare Broking.

He picked HDFC Life, Berger Paints, ICICI Bank, Maruti Suzuki and Britannia as best bets for such direct equity SIP.

HDFC Life has strengthened its position in the life insurance sector with strong growth seen in the last five years. Its new business premium has growth at 28 per cent CAGR over FY15-19 insuring nearly 5.14 crore lives (73 per cent CAGR). Further, the company’s net profit and asset under management have also seen a healthy growth of 14 per cent and 17 per cent during the same period.

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“Consistent market share gains, strong return ratios and healthy dividend ratio make HDFC Life as one of the best long-term bets. We are bullish on ICICI Bank also as steady loan growth and ease in credit cost would improve its return ratios going forward,” Mishra said.

Berger enjoys a market share of around 20-22 per cent in domestic paint sector and is well placed to capitalize on the growth opportunity in the industry. ICICI also posted a decent set of results in June quarter with a slight miss on profit estimates.

AK Prabhakar, Head of Research, IDBI Capital Market said SIP is the best way as it takes care of volatility. “Investors can consider HDFC Life, ICICI Bank, Indian Hotels, L&T and Bharat Electronics for such SIPs,” he said.

SIP in equities can help reduce the risk of timing the market by averaging out benefits. Investors can invest a pre-decided amount or pick a specified quantity of stocks at regular intervals over a long term. If the investment is constant, one would buy more units when the price is low and fewer units when the price is high. Similarly, when one buys a specific quantity at regular intervals, it may lower the cost by averaging it out.

The only drawback in a direct SIP is that it does not allow automatic diversification the way a mutual fund SIP does.

Market experts say investors opting for this route must have a clear view about the company and its stock price for 2-3 years or even more. One should go through the company’s balance sheet, study cash flow statements, return ratios and consider the impact of any micro and macro-economic changes.

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Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas recommended Reliance Industries, HDFC Bank, L&T, HDFC Life and Bajaj Finance for direct equity SIP.

There are hopes that volatility in the market will continue for some more time. Already, second-rung stocks have witnessed severe selling pressure over the past 20 months, while the benchmark BSE Sensex has advanced 11 per cent between January 1, 2018 and August 27, 2019.

The BSE Midcap and Smallcap indices have plunged 24 per cent and 35 per cent, respectively, in the same period.

“We expect the volatility to continue in the market as the slowdown in the Indian economy is going to continue for some more time. The trade war between US and China is also contributing to global volatility and is unlikely to abate anytime soon. As a result, we feel that SIP is a good way to accumulate stocks amid the ongoing market correction as it will allow investors to take advantage of the volatility in the markets,” said Jyoti Roy, Equity Strategist (DVP), Angel Broking.

The brokerage believes the consumer space and some private sector banks would be relatively safer bets. Among private sector banks, the brokerage picked HDFC Bank and ICICI Bank as good bets. Besides, it is bullish on VIP Industries from the consumer discretionary space.



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