Worried by Rupee, Sensex, Oil Crash? Buy These Five Stocks

The turmoil in stock markets – highlighted by the biggest one-day point crash in the BSE Sensex – has hit investor sentiments. Analysts, however, say that the sharp correction is an opportunity to accumulate quality stocks at a bargain.

“The easiest way to identify beneficiaries of such a market fall is to look at companies which benefit from a fall in commodity prices or a lower rupee,” wrote Prabhat Awasthi of Nomura.

Here are Nomura’s top picks

1) Asian Paints (target Rs 870): 70-75 per cent of the company’s input cost basket is linked directly to crude prices. If crude price stays around $45/barrel, the earnings for Asian Paints would be higher by 7 per cent. As GDP growth picks up, Asian Paints’ volume growth will also improve, which will help drive higher top-line growth.

2) Hindustan Unilever (target 1,020) — A large part of the input cost basket for the company like packaging materials and palm oil is directly or indirectly linked to crude prices. There would be upside risk of 5 per cent to earnings if crude stays around 45/barrel. There are some signs of demand revival in the urban sector, which augurs well for the company’s efforts to focus on the premium segment.

3) HCL Technologies (target Rs 1,110): Nearly 60 per cent of HCL Tech’s revenues come from fast-growing IMS, BPO and Engineering Services. In two of the segments – IMS and Engineering Services – HCL Tech is among the largest and strongest players. Expect EBIT margins to improve towards the middle of the guided range of 21-22 per cent over FY15-17. Current USD-INR rates provide increased comfort to EBIT margin expectations.

4) M&M (target Rs 1,618): The recent fall in commodity prices will benefit auto companies’ EBITDA margins. M&M may be able to largely retain the benefit of falling commodity prices in the Farm Equipment segment, where there is lower competition. The fall in diesel prices in the recent past is also positive for Auto sector demand. Diesel prices are currently down nearly 10 per cent from June 30, 2015 levels and may decline further. This can result in a nearly 1 per cent decline in the cost of ownership and can help demand.

5) UltraTech Cement (target Rs 3,416) Since the June quarter, prices of coal and crude oil, which are key inputs for cement, have softened further. The fall in input costs coupled with benefits from efficiency-improving initiatives should provide tailwind to UltraTech’s earnings. UltraTech continues to invest in land to support future organic expansion, develop new distribution channels, and target higher cost efficiencies. Higher volume growth, cost savings initiatives and improving regional exposure will boost earnings growth.