5 best Sensex stocks for long term

Indian Stocks are falling due to panic selling by investors as negative news are pouring from all corners. Investors are enquiring about bottom which is always unpredictable at any time. Fundamentally sound stocks generally perform better in these troubled times. I have picked 5 Sensex stocks for those who prefer to invest in index stocks. Long term investors should accumulate these stocks to get 60-80% returns in one year. Keep some cash to accumulate more on any unexpected fall.

Note: I generally prefer midcaps and small caps to get huge returns as I am a high risk taker.

5 best Sensex stocks for long term:

1. Larsen and Toubro (L&T): This is the best stock in Sensex for long term investors. L&T surprised analysts with their better than expected results. But stock still underperformed to bad market sentiment. As L&T entered into niche areas, margins will improve in the coming quarters. Upcoming demergers will improve L&T valuations in the coming quarters. Huge order book is another plus point. Announcement of bonus is a near term trigger after current turmoil.

CMP: 2,564. EPS: 74.3 P/E: 34.5
Expected EPS for FY2009: 105-110.

Ideal entry price: 2,350-2,400.
1 Year target: 3,600-3,800.
Best investment duration: 3 years to get wonderful returns from this giant.

2. ICICI Bank: Real strength of ICICI Bank lies in their subsidiaries. ICICI securities IPO is a near term trigger.

CMP: 733. EPS: 37.3 P/E: 19.6
Expected EPS for FY09: 48-52.

Ideal entry price: 660-680.
1 year target: 1150-1,250.

3. State Bank of India (SBI): Attractive valuations but unpredictable government interference.

CMP: 1,249. EPS: 106 P/E: 11.7
Expected EPS: 135-140.

Ideal entry price: 1050-1100.
1 year target: 2,000-2,200.
Best investment duration: 18-24 months.

4. Reliance Communications: Another “Must buy” stock for long term investors if they don’t overly paid for acquisitions. Reliance Infratel IPO is a short term trigger.

CMP: 491.6 EPS: 12.5 P/E: 39.2
Expected EPS for FY09: 25-28.

Ideal entry price: 470-480.
1 year target: 750-800.

5. Reliance Industries: This stock holds enormous intrinsic value. Reliance will give good returns for patient shareholders who invested for long term. Kakinada gas will change fortunes of shareholders in short term. Invest in Reliance; believe in Ambani; forget about it.

CMP: 2,100 EPS: 138 P/E: 16

Ideal entry price: 1,800-1,900.
1 year target: 3,000-3,200.
Duration: Invest for 2-3 year to get complete benefits.

ONGC: I am generally not interested to put money in Government companies. I strongly believe in the ability of policy makers to destroy any PSU. But recent policy by govt to aid ONGC may benefit but we need more clarity on the subsidy sharing G.O.

Infosys, Bharti Airtel and Grasim are good stocks to get safe moderate returns in these difficult times. Fortunes of DLF and M&M will depend on inflation. Recent salary hikes may hit the balance sheets of companies like BHEL. Tata Steel is my underdog for FY09. We will get more clarity on these stocks in the next quarter results.

Withdrawal of support by Mayawati (BSP) to UPA government is shock news to spoil the investors’ sentiment. Markets will definitely fall but next week inflation numbers and crude prices will determine future direction. Inflation containing measures will trigger another collapse in Banking, Real Estate and Auto sectors. If crude prices will fall to below $130 dollar per barrel, markets will see some rebound.

Verdict: Political turmoil coupled with inflation will lead to panic selling among investors. Smart investors should utilise this opportunity to buy fundamentally sound stocks for long term. Many companies are planning for open offers/buy backs. Closely follow them to gain short term opportunities. If you are holding good stocks, don’t resort to panic selling. It is difficult to find bottom, so just accumulate great stocks for 12-15 months investment duration.

(Source: Internet)