Investors need to play safe in markets; top 3 stocks to bet in volatile markets: Dipen Sheth

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In 2018, the market was still hitting record high till January but lost momentum post Budget. We saw a terrible March quarter which pushed key benchmark indices below crucial support levels – Sensex slipped below 33K while Nifty dropped below 10,200, thanks to weak cues - both globally and domestically - which weighed on sentiment.

The old macro enemies are making a comeback in India, such as higher oil prices, fiscal slippages, and if interest rates and inflation go up it will weigh on macros, Dipen Sheth, Head-Institutional Research at HDFC Securities said in an interview with CNBC-TV18. There is politics and populism looming on the horizon amid busy election year in 4 large states.

On the global front, trade war fears between China and US are weighing on sentiment. Back home, financial systems are in trouble, thanks to rise in non-performing assets. No double-digit growth in corporate earnings is also bad news for equity markets.

But, there is good news which investors should not ignore, suggests Sheth. We saw 26 percent rise in income tax filings, 17 percent rise in collections in a year when the growth was challenged, he added. The second attempt to implement the e-way bill has gone through successfully.

For the next one year, investors should lie low and stay with safe stocks.

Here is a list of some stocks which Sheth discussed in the interview:

Cholamandalam Finance:

Chola Finance is trading at 3.5x FY20 book. In financials, investors should look out for companies that are doing business which other are not doing. If we look at the PSU banks, they have been doing the same old stuff for so many years.

There are a lot of underserved segments which demand servicing. Lot of NBFCs figured out ways to do small ticket lending. It has a niche class of management, and if they asset quality right, this company has got 10 years of growth.

Hero MotoCorp:

If we look at the monthly sales number which beat analyst and our estimates reasonably well. Remember, this company was accused of losing market share and not getting the game right in scooters, and CV space.

All the money which is spent on the Bharat theme will boost stocks in the two-wheeler space. And, in the two-wheeler space, Hero MotoCorp is a smart buy which could give double of FD returns.

Kotak Mahindra Bank:

One thing which has gone wrong in the financial space is ‘rise in NPAs’ in the recent past. And, this is one bank which simply doesn’t have it. We have a total stressed asset exposure of Rs132-136 bps.

We are happy to give them over 4x on the book. As PSU banks run out of capital and take it easy on lending, it is banks like Kotak which are overcapitalized are going to go out and lend to creditworthy people.