Stock markets have been confusing investors and traders alike in the last few weeks and after breaking down some important technical support levels, the indices showed buying interest from lower levels. However, the pullback on the index has still not been powerful and cannot be described as a bullish trend for the medium to long term. The smart pullback from lower levels suggests that there is some more room on the upside. But for traders, it is pertinent to follow initial strict stop loss upon every up move. The biggest disappointment from the overall index space has been the midcap segment, as there has been tremendous selling by foreign institutional investors in that space. It is a fact that a lot of money during the last three years has come in the midcap category for the Indian mutual fund industry. Majority of the money has come by way of new first-time investors investing through the systematic investment route. Unfortunately, many of these investors in mutual funds are not aware of the stock market behaviour, patience and the long term investment conviction. This may lead them to opt out of these particular asset class funds and if that happens, then midcap stocks will have a tough time going ahead. Diligent investors should not be hassled by the current fall, but they should utilise this time for staying invested in quality stocks and good mutual fund schemes. Mutual fund investors investing through the systematic investment route should continue without fail and take balanced advice from a good financial advisor. From an economic perspective, the rising crude oil prices and US bond yields are a dampener for the Indian stock market. Crude oil prices had touched $80 bbl earlier, while US bond yields crossed the 3% mark, which weakened the INR. FIIs are continuously selling Indian equities, which has led to the sell-off in indices, but prices have corrected and value has started emerging in quality counters. In this fall, it is advisable to invest in quality earning stocks and avoid high beta stocks with weak results. In short, identify stocks which are coming out with good numbers and accumulate them for the long term as 2018 will be a roller coaster for equities.
One such excellent quality stock of high pedigree is Trent Ltd. It was established in 1998 as part of the Tata Group and operates Westside, which is India’s largest and fastest growing chain of retail stores. The Westside format offers exclusive brands across clothing wear, footwear, cosmetics, perfumes, handbags, household furniture and accessories. The company had ventured into the hypermarket business in 2004 with Star Bazaar providing an assortment of products like food grocery and daily needs made available at lower prices. In addition, the company has Landmark, which is a family entertainment format store with focus on toys, books, sports related merchandise, tech accessories, etc. Zara is an upmarket brand with excellent youth appeal and a steady performer and an ability to tackle competition from other foreign brands. Financial performance for FY17-18 has been quite robust and Trent provides a unique opportunity to invest in three powerful brands. The Trent stock currently quoting at Rs 320 can appreciate by 25% in the next one year.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.