Five Picks for 2012

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Our Favorite Picks at current valuations

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Five Picks for 2012

  1. 1. LARGE CAP PICKSMAY 2011
  2. 2. Rationale for Picks• Undervalued relative to • Consensus Valuations • Previous Peaks • Sectoral Cycle = The Right Price at The Right Time• Low Possibility of unpleasant (non financial) surprises• Industry and Index Leadership
  3. 3. CMP : Rs 184352 Week L/H : Rs 1571-2688 State Bank of IndiaMid Term View• Negatives Behind – Stock suppressed despite positive result surprises except Dec 2011• Consensus Valuations far higher than current levelsNear Term View• Available at discount to PSU Index and other heavyweights like HDFC Bank• Near Term fall due to FnO speculative activity – Results in May 2012 to act as trigger• Our Target – Rs 2400
  4. 4. CMP : Rs 234452 Week L/H : Rs 2161-Rs 3023 Infosys TechnologiesMid Term View• Turnaround in business with time as management settles down and demand picks up for key products cyclically• Maintaining Premia / Rates evident of confidence in products and services• Short term issues like Visa investigation, employee dissatisfaction putting pressure on stock – Industry issues and not specific to InfyNear Term View• Over reaction to fall in guidance – Price down by 30% plus for a 5-6% drop in guidance• Our Target – Rs 3000
  5. 5. CMP : Rs 115452 Week L/H : Rs 969-Rs 1868 L&TMid Term View• Short term issues in power segment and construction etc putting pressure on long term value – order book slowdown and currency movements cyclical in nature• Diversified conglomerate capable of extracting value from the ‘India growth story’ – best proxy• Long term outperformance against closest competitor BHELNear Term View• Stock down ~ 50% from peak• Our Target – Rs 1500
  6. 6. CMP : Rs 1503 52 Week L/H : Rs 1260-Rs 1843 Bajaj AutoMid Term View• Rupee expected to remain on a long term depreciation mode – Benefits Bajaj Auto in export markets (25%+ of sales)• Wide distribution network, diversified product basket and established capabilities in technology• Available around fair value estimates – more stable than Hero / higher discountNear Term View• Long term outperformance marred by short term market cyclicals / increased competitive intensity• Our Target – Rs 1800
  7. 7. CMP : Rs 517 52 Week L/H : Rs 400 -Rs 553 HDFC BankMid Term View• High NIMs / Capital Adequacy to ensure outperformance of bank index continues• A proxy for banking for FIIs in ETF portfolios• Premium to sector may come in question from time to time but markets willing to give premium for more than a decade now – likely to continueNear Term View• Movements correlated to index but has maintained a 20% plus lead of indices• Our Target – Rs 625
  8. 8. http://castaneawealth.blogspot.in/ The information contained herein is not intended for publication or distribution or circulation in any manner whatsoever and any unauthorized reading, dissemination,distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed by Securities and Exchange Board of India before investing in Indian Securities Market. In so far as this report includes current or historic information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed.

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