As uncertainties prevail and a revival expected only post second quarter of 2009, looking at current stock market situation it will pay to buy stocks of large cap companies with a proven track record, high earnings visibility, low leverage, good book value and low debt. Buying stocks with strong promoter holdings looking at recent Satyam fiasco could be one one of the considerations for stock buying.

Stock trades at cheap brokerage fees and buying stocks online or online stock trading have made trading stocks very frequent practice for normal investor, they should understnad that stocks mentioned here are for long term investing and will be fruitful if they hold for longer time durations.

In the aftermath of economic slowdown and fall in markets, and also uncertainty over the next few quarters, it is advisable to play safe and practice stock buying of large companies with a consistent track-record. Stock trades are best to be avoided for retail investor. Online stock trading have made it very easy for retail investors to trade stocks very frequently. It is complete no-no in current stock market situation.

Sandeep Shenoy, strategist, Pinc Research says, “Companies with integrated operations, strong balance sheets, low leverage or ability to complete financial closure for capex, and low working capital requirements are preferred.”

Beyond that, interest rate sensitive sectors are finding favour. Says Srivastava, “We are favourably inclined towards rate-sensitive sectors like banking, auto or even in real-estate on a selective basis. But, as the market is expected to be range bound, a trading strategy could prove helpful.”

Defensive plays like FMCG and utilities, too, figure among the preferred lot even as there is already some amount of premium built in their valuations, due to the stability they provide. Additionally, users of commodities are expected to outperform. Says Manish Sonthalia, senior VP Research & Strategy, Motilal Oswal Securities, “Now, the consumption side, like auto (two wheelers) will get more importance. Among other preferred sectors are FMCG and telecom.” Commodity user industries like construction, which may get a fillip on account of increased infrastructure spending, also figure in the list, although there are some issues pertaining to funding of projects.

The laggards in 2009 will be commodities (metals), capital goods (due to order slowdown), real estate and IT (weak demand).

With respect to return expectations from the market (Sensex), it ranges 10-12 per cent on the conservative side to as much as 35 per cent, by December 2009.

Regarding investment worthy companies, The Smart Investor looked at the BSE 500 (94 per cent of total market capitalisation) and excluded companies with high debt levels or weak financials. Only those with a proven track record, good earnings visibility, strong cash flows and ability to raise debt were considered, as they will be in a better position to withstand tough times. Notably, many of them are leaders in their respective businesses, and their stocks capable of delivering 18-20 per cent returns over the next one year.

Have a look at these best large cap stocks to buy in 2009.

Tata Power – Got the power to be best
Sun Pharmaceutical – Best stock in Pharmaceutical sector
State Bank of India (SBI) – Elephant in Banking sector
Reliance Industries (RIL) – Best safe investment
IVRCL Infrastructures – Good stock with strong order book
ITC – Best stock in cigarettes business – Major in FMCG Too
Hero Honda – Best stock to invest in two wheeler auto industry
HDFC – Best stock to invest in Banking sector
Bharti Airtel – Best stock in telecom for definite investment returns
Apollo Hospitals – Good large cap stock in Healthcare

Click on image to enlarge

Consisting permforming Stocks

Other investment worthy Stocks

Investment worthy stocks

Reference: Business Standard

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