Make sure to tick these 3 boxes while buying stocks next 12-18 months

“One should use this opportunity right now because of the results which are coming and because of high commodity prices to get into some of these economy facing industry stocks which can give good returns over the next one, one and a half year,” says Neeraj Dewan, Director, Quantum Securities.

How should one navigate the volatility? What have you been selling or buying? Have you spotted any opportunity in the recent fall?
Yes, of course! There has been so much volatility in the last four-five days. One needs to just keep focus and invest in stocks where there is a long term potential and which are attractive valuation-wise.

The way the markets were going up earlier, some of the stock valuations were not really getting considered and the stocks were just being chased in momentum. Now it will change. The pattern will change to growth stocks where the company shows growth and good potential. That is where the ultimate money will be made in the next one-one and a half year. One should be looking at specific stocks where balance sheets are strong, which has growth visibility and attractive valuation. These are the three factors which one should keep in mind while looking at buying stocks for the next one-one and a half year.

Which way is the market going to head next? Of course, a lot depends on which way the geopolitical crisis actually pans out, but would you say that at least a large part of the selling is behind us?
It has more to do with the time-wise correction. One of course is the geopolitical concerns which are there right now because of the Ukraine Russia problem and then in March also, there will be a lot of events. The election results will be out for UP and other states and then we will have the US Fed meeting. All these can have some impact on the market.

So, I think volatility will continue between now and mid March but we have seen time and again, that 16,800 is a strong support for Nifty which we held on to. I do not think that should get broken unless we have got a drastic view coming from any of these events. Whenever there are dips, closer to that, one should use that opportunity till one sees a contrary happening and the support breaks and some bad news comes. Then one can again take up all but till that time, one should look at dips to buy around those levels.

How have you read the ACC numbers. What are you expecting from Ambuja Cement?
The pressure which is there because of fuel cost on cement companies will be seen across. I am expecting Ambuja top line to grow but bottom line will be under margin pressure. That has been the case for a lot of other industries also.

Now most of these consumer industries have seen pressure on the margins and the top line has seen decent growth but that is visible in cement and it should continue. But in the next maybe two, three months, the kind of concern that the central bankers have for inflation will get translated into concern by our RBI also. I think the commodity prices, the fuel prices which have been going up, should start correcting at some point. Besides crude, all global impacted commodities like steel have started correcting.

Once the geopolitical concern is out of our way as far as the Ukraine Russia problem is concerned, we may see some correction in fuel also hopefully. So this pressure should start coming down. Plus any economy facing industry – cement is one of them – will see good growth in the top line and once the commodity pressure eases, then it will have a multiple effect on the bottom line also. So one should use this opportunity right now because of the results which are coming and because of high commodity prices to get into some of these economy facing industry stocks which can give good returns over the next one, one and a half year.