India Strategy: Midcaps - Double your stake, quadruple your money

To make the most of the ensuing Bull run, we have handpicked several interesting mid cap stocks having potential to double in two years.

Jul 02, 2014 12:07 IST India Infoline News Service

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years - Warren Buffett

 

After five tumultuous years for Indian equities as an asset class, we are at the onset of a new multi-year Bull Market. In this phase, we assign high probability to Nifty delivering 60% return or even doubling in 4 years. Many individual stocks, in the meanwhile, could double in much smaller periods. While many would be skeptical of taking fresh positions given the new highs that benchmark indices and stocks have hit, our belief is that it is just the beginning. Our premise for this belief is purely tectonic given that India has achieved political stability and is on the course of repairing its macro economic situation. Moreover, valuations are nowhere close to the highs achieved in the previous Bull run and are near long term historical average levels.

 

Globally too, things are getting better with macro factors in US (except Q1 CY14 GDP, which was a blip) showing signs of recovery. Euro Zone has also shown stability post the financial crisis. With Japan and Euro Zone likely to ease monetary policy, liquidity is expected to be benign and will chase growth in emerging nations leading to strong FII inflows. India, for the aforementioned factors is one of the most attractive destinations.

 

Empirically, during Bull markets, midcaps outperform large caps. To make the most of the ensuing Bull run, we have handpicked several interesting mid cap stocks having potential to double in two years. All stocks rank high in terms of earnings growth potential, balance sheet strength, future cash flows, management bandwidth and valuation appeal.

 
BUY recommendation summary
Company Name Sector M. Cap CMP Target Upside
Rs crore Rs Rs %
Alembic Pharma Pharma 5,071 269 550 104
Bharat Forge Auto Ancillary 14,163 608 1,250 106
Dhanuka Agritech Agriculture 1,990 397 800 101
Finolex Cables Capital Goods 2,694 176 352 100
Greaves Cotton Auto Ancillary 2,786 115 232 102
Indiabulls Housing Fin Financials 12,801 383 771 101
JK Lakshmi Cement Cement 2,475 210 433 106
Jyoti Strucutres Capital Goods 487 59 120 102
Kirloskar Oil Engines Capital Goods 3,450 238 485 104
LG Balakrishnan Auto Ancillary 693 883 1,878 113
Magma Fincorp Financials 1,857 98 198 102
PTC India Fin Services Financials 1,773 32 65 103
SREI Infra Finance Financials 2,465 48 97 102
Source: India Infoline Research

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