For most Hindus, the New Year begins in the summer. However, in Gujarati and Marwari traditions, it starts in Diwali.
India’s stock markets are dominated by brokers belonging to these two communities. Hence, every year, Diwali assumes a special place for those in the stock market.
Here are few things to know about Muhurat trading:
· Stock exchanges would open for trading at 6 pm on 3 November 2013 for Muhurat trading. The session lasts for an hour and a half. Muhurat means an auspicious moment to start something new. This is a tradition for over 100 years on the Bombay Stock Exchange and the mostly Gujarati and Marwari stock broking community. The session marks the end of the traditional financial year and the beginning of the new one.
· People look at stock markets from a point of view of wealth creation. Stockbrokers execute token trades on behalf of their clients or their own account to mark the occasion. Stock exchanges and broker offices are decorated to seek blessings of Lakshmi, the goddess of wealth.
· Chopda or Sharda Puja is performed. ‘Chopda’ is an account book. On the New Year day, you close your previous year accounts and start writing your financial statements in a new book. However, since most stock brokers are corporatized, accounts are no longer maintained physically. They are in electronic format. Also, for most companies in the business, the financial year starts on 1 April.
· Typically, the trading activity on Muhurat trading is thin. Over the years, statistics from the Bombay Stock Exchange data (available since 1992) shows that the Sensex has ended in positive territory 7 out of 10 times. The average gain or loss is not more than one per cent. Transactions mostly have a sentimental value than any impact on the portfolio.
Diwali is the time of the year when investors review their investments. They shuffle the stock portfolio based on their assessment for the year gone by and the road ahead. Various brokerage firms give recommendations for investors.
Here are five stocks most recommended for buying this Diwali:
1. ICICI Bank:
Target price: Rs 1,195
The second-largest private bank is one of the top picks this Diwali. Deposits are a key method of raising funds for a bank, and are cheaper than borrowing from the RBI. So a high ratio of current and savings account deposits to total deposits (CASA ratio) means the bank is attracting money at very low cost. This increases its profitability. ICICI Bank has the highest ratio among private sector banks. Its overall balance sheet also improved in the July-September quarter despite a slowdown in the economy.
2. Axis Bank:
Target Price: Rs 1,430
The bank has been increasing its presence in the retail banking segment by attracting more consumers to open current and savings accounts. It has also been consistently delivering better-than-industry growth due to this, according to Religare, a brokerage firm. Also, its asset quality has not worsened significantly in the first half of this fiscal. It has also turned cautious in offering loans on account of uncertain macro-economic conditions.
“Notwithstanding moderate concerns on its corporate book asset quality, we expect the retail business to drive earnings,” Angel Broking said in a report.
3. Tech Mahindra:
Target Price: Rs 1,830
India is seeing a pickup in exports. IT services exports account for a significant chunk of total exports. With the rupee hovering at 60/$-levels, the IT sector has the most to gain as it earns in dollars and other foreign currencies. Tech Mahindra, the first largest IT company in India post its merger with Satyam, has aggressively acquired deals. This is expected to help post a strong revenue growth. Also, the stock price is currently at attractive levels. “Its growth momentum likely to continue due to the pick-up in discretionary spending and strong deal momentum in the US and some parts of Europe,” Religare said in a report.
Other favourites in the IT space are Wipro and Infosys.
4. Colgate
Target Price: Rs 1,450
Oral care company Colgate has consistently reported strong volume growth by maintaining an aggressive strategy to reduce competition. This is expected to drive future growth too. Also, changing trends in consumption of tooth paste in rural areas and the power to increase prices without affecting demand are other positive factors for the consumer goods company. “We prefer Colgate India in the fast moving consumer goods (FMCG) space due to a better growth outlook and a better performance on the volume growth, which remains at 9-10% despite intense competition,” Sharekhan said.
Cigarette-maker ITC and Godrej Consumer Products Ltd are other favourites in the space.
5. L&T
Target Price: Rs 1,130
Despite a slowdown in the Indian economy, analysts are bullish about the infrastructure major L&T. It is expanding its presence outside India, which is now expected to contribute 30% of its total revenues. Even in the domestic front, it has posted a strong growth in terms of winning orders. This shows its ability to withstand a slowdown. “With a healthy order book, strong balance sheet, wide ranging capabilities and international presence, the company is optimistic about its growth,” Religare reported.
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