A correction in the Indian equity markets over the past two trading sessions - the Sensex is down 4.3% and the BSE small cap index, 8% - has made shares of some of the good companies more attractive. The following are 6 companies which are likely to either remain unaffected by the current cash crunch in the market or will see minimal impact in coming days and will provide excellent returns during next year.
SUN PHARMA (Large Cap) India's largest pharmaceutical company's share price has almost halved from its peak in April 2015. The current price factors in most of the negatives. Sun Pharmaceutical has said it expects 8-10% revenue growth this fiscal year. In addition, there could be triggers such as US clearance for its Halol facility and improvement in the US business from limited competition specialty products. These and a strengthening US dollar make it a good bet. SBI (Large Cap) India's largest lender State Bank of India is likely to be the biggest beneficiary from the deposit rush driven by demonetisation as it'll greatly reduce the cost of funds. With 18% share of bank deposits, which is likely to increase now, after the demonetisation tremors calm down it may lead to growth in SBI's investment book, which mainly comprises government bonds at a time when yields are falling, resulting in treasury gains.
GILLETTE (Mid Cap) The company is unlikely to see much impact from the current cash situation. The stock is down 25% from its all-time high and with the recent correction, at a 5-year-low price-to-earnings multiple. Year-on-year, Gillette has seen margins improving and strong earnings growth. The stock has given 100% return once in every three years since 2009. TECHNOCRAFT (Small Cap) Technocraft's businesses -drum closure, scaffolding and textile -are export-oriented. Its scaffolding business has received approvals to operate in the US and Europe. The US now accounts more than 35% of this business compared with 10% last year. With president-elect Donald Trump's plan to spend $1 trillion on infrastructure, Technocrat will be one Indian company to watch out for.
HONDA SIEL POWER (Mid Cap) The company, which sells pumps and farm equipment, is seeing a rapid rise in exports -23% q-o-q and 44% y-o-y in the September quarter. Exports account for almost half the revenue and will continue to grow given its Japanese parent is increasing its manufacturing base in India. J KUMAR INFRAPROJECTS (Mid Cap) With more money with the government, the infrastructure space is expected to get a boost. J Kumar is one of the few infra companies with a debt-free balance sheet. This will allow it to bid for more projects.