20 Midcap Stocks For Accelerated Wealth Creation

15 Aug

midcap stock picks indiaIt is statistically proven that long term investments in equities (stocks) can outperform any other conventional form of investments or asset classes such as real estate, gold or bank/post office deposits. However, a lot of people hesitate to invest in the stock markets due to a number of reasons including risk of losing the capital, volatility in the stock market, confusion between speculative trading vs investment, and the uncertainty around the companies that they invest in or sheer lack of knowledge to pick the right stocks.

Investing in Mutual funds (Read Systematic Investment Plan or SIP) is probably the easiest and safest route to enter the stock market rather than going for direct stock investment. However, the return on investment can be much higher if you go for direct equities as long as you pick the right stocks and companies to invest in.

An ideal stock portfolio (Read my stock portfolio that I often update) should have a mix of large cap and midcap stocks across several sectors/industries to minimize your risks. However, if you are looking at a faster growth rate you can even think of a Portfolio that’s heavier on the Midcap side if not an All-Midcap Portfolio. Given below, is a list of 20 handpicked midcap stocks in India that I believe should offer significant wealth creation (at least four to five times, if not more) for investors in the next ten years.

My List of 20 Midcap Stocks

Most of the Midcap stocks in this list are those with the proven record of high return on investment (Based on the ROE, ROCE parameters, sales/profits growth numbers etc) over a period of time. I have also included a couple rather new players which I think will excel in their respective businesses and hence offer higher returns to investors. Further, these companies are run by excellent management and promoters too and hence the business health and longevity is not under threat.

Here’s my winner list:

1. Amara Raja Batteries
2. Apollo Hospitals Enterprises
3. Atul Auto Ltd
4. Aurobindo Pharma
5. Avanti Feeds
6. Bharat Forge Ltd
7. Britannia Industries
8. Cera Sanitaryware
9. Colgate Palmolive Ltd
10. Dewan Housing Finance Ltd
11. eClerx Services
12. IndusInd Bank
13. Kaveri Seed Company
14. Kitex Garments (Previously recommended)
15. Mayur Uniquoters
16. Motherson Sumi Ltd
17. Pidilite Industries
18. Torrent Pharmaceuticals
19. UPL Ltd
20. Zensar Technologies Ltd

(Some notable omissions include Page Industries, Eicher Motors etc which have run up quite a bit)

Investment Methodology

Since the markets have run up a lot, putting all your money as lump sum investment can be very risky at the moment. Hence the following is the methodology that I suggest.

  • Make a shortlist of 12-15 of the above midcaps for your investment. Give more weightage to sectors like Pharma, Banking and Auto ancillaries
  • Systematically buy these stocks either by putting a fixed amount per month into buying the shortlisted stocks or by adding these stocks at every market correction
  • Track your investment on a periodic basis for any change in fundamentals of the selected companies. You don’t need to track them on a daily basis as long as your choices are good and have a long term plan with them
  • Periodically (once a year may be) validate and check the sector-wise weightage of your holdings and readjust if required
  • Watch them grow! And do not let the market fluctuations affect your investment decision UNLESS the fundamentals of your invested companies change.

Disclaimer: I am not a qualified finance adviser or portfolio manager. Please consult the experts before taking any investment decision in the equity market. You may have to do further research on these stocks on financial portals, websites of these companies as well as mandatory filings by them before taking any positions. As a disclosure, I have investments in many of the stocks mentioned above at the time of writing of this post.

Related Posts

10 Multibagger Midcap Stocks in India
10 Small Cap Stocks with Growth Potential

Good luck with your investments!

How Restaurant Bill is Calculated in India? VAT, Service Tax, Service Charge Calculation Explained

14 Jun

How many times hasn’t your bloated restaurant bill left you clueless as to how components like VAT (Value Added Tax), ST (Service Tax), SC (Service Charge) etc are being calculated?

Worry no more…

Without complicating the matter much, let me explain how a typical restaurant bill break up is arrived at as per the prevailing taxing norms as of June 1, 2015.

VAT, ST and SC

The following are the rules for calculating VAT, ST and SC.

VAT is typically charged at 14.5% on all food items and non-alcoholic beverages (includes, packaged water, juices, mocktail etc).

VAT for alcoholic beverages and cocktails is 5.5%.

SC is charged at restaurant owner’s will. This can vary from 0% to 15%. This is like an in-built tip and if Service charge is levied, it has to be clearly mentioned in the menu.

ST is calculated at 5.6%. Service Tax is actually 14% and it is applicable on 40% of the total bill (Including food total + Service charge).

ST = 5.6%, i.e. 14% of 40

Note: As per the government rule, the Service tax is applicable only to those restaurants and food joints having the air-conditioning or central air-heating facility

A Sample Restaurant Bill Calculation

Attached here is a sample restaurant bill that I recently (after June 1st, 2015) got from our family dine out.

indian restaurant bill with VAT, ST and SC
(Click on the image to Enlarge)

The table below explains how the above bill amount is calculated.

Please note that some restaurants may provide separate bills for alcoholic beverages and the food. In such cases the applicable VAT is different for both the bills.

Particulars Amount
A. Alcoholic Beverages
(330+680)
1010.00
B. Food & Non-Alcoholic Beverages
(170+160+260+320+300+360)
1570.00
C. Service Charge @ 10% for this place
(10% of A+B)
258.00
D. VAT for Alcoholic Beverages @ 5.5%
(5.5% of A)
55.55
E. VAT for Food & Non-Alcoholic Beverages @ 14.5%
(14.5% of B)
227.65
F. Service Tax @ 5.6%, rounded
(5.6% of A+B+C or 1010+1570+258)
158.93
Total Net
(A+B+C+D+E+F)
3280.13


Hope that explains how the final rounded bill amount of Rs.3280/- is arrived at. Next time, please pay attention to your bill details because many restaurants may not have changed their billing system yet.

Happy Dining!

Kerala Style Sardine Curry (Mathi Curry) Recipe

25 Apr

sardine currySardines are one of the cheapest and healthiest fishes available in India. They contain plenty of unsaturated fat, Omega-3 fatty acids and minerals and hence extremely good for your health when consumed in steamed or curried form and not as fried fish – although fried ones taste exceptionally good. In the state of Kerala, the fish curry made out of Sardines (Mathi or Chaala in the native language) is probably the most common lunch dish among non-vegetarians that comprise of some 90% of the Kerala population.

Fish curry in Kerala style comes in three or four close variants and they are fairly easy to make. The secret to making lip-smacking fish curry lies in the quality of ingredients used – primarily the coconut and the fish itself that has to be fresh and cleaned really very well (Read: Not like how your vendor does it).

Let us now head over and see how my variant of Sardine curry recipe looks like.

Ingredients

  1. Indian Sardines (aka Indian Oil Sardines) – 1Kg, cleaned & cut into 2-3 pieces
  2. Mustard Seeds (big) – One pinch
  3. Shallots – 1 cup, finely chopped
  4. Ginger – 1/2 inch, sliced lengthwise into 3-4 pieces
  5. Garlic – 4 to 5 cloves, sliced lengthwise
  6. Green Chillies – 2, split once lengthwise
  7. Curry Leaves – 10-12 leaves
  8. Salt – 1 teaspoon
  9. Cambodge (Kokam) – 3-4 pieces (Soaked in water for 15 mins)
  10. Coconut Oil – 2 tablespoons
  11. Kashmiri Chilli Powder – 1 teaspoon
  12. Regular Chilli Powder – ½ teaspoon
  13. Coriander Powder – 1 teaspoon
  14. Turmeric Powder – ½ teaspoon
  15. Fenugreek Powder – One pinch
  16. Fresh Coconut – ½ portion, scraped

Note: Ingredients from 11 to 15 can be replaced with 3-4 teaspoons of Eastern or Nirapara brand of Fish masala powder. I personally use the Eastern brand

For decoration & seasoning:
– Curry leaves – 1 string
– Shallots – 2, vertically sliced to make thin separable rings
– Coconut oil – 1 tablespoon

Preparation

Grind ingredients 11 to 16 (Kashmiri chilli powder to coconut) into a fine paste after adding adequate water.

Heat a seasoned earthen pot (or non-stick pan) and add 2 tablespoons of coconut oil to it. When the oil is really hot, add mustard seeds and wait till they crackle.

Add chopped shallots to it and sauté it in high flame till it turns light brown and soft. Add ginger-garlic slices, green chillies and curry leaves and stir fry for about 30 seconds.

Add the ground paste to it, about 1½ cups of water and soaked cambodge (along with the water used for soaking), salt and mix very well.

Add fish pieces and make sure that they are immersed well in the masala. Cook in high heat till it starts boiling and cook in medium flame further for about 8-10 minutes occasionally (every two minutes or so) shaking the content by holding the edges of the earthen pot rather than using a ladle to stir.

Turn of the flame and add the string of curry leaves on top to garnish.

For seasoning, heat 1 tablespoon coconut oil in the seasoning tawa and add the shallot rings to it. Stir fry till they are dark golden brown and add it along with the oil to the fish curry.

Serving Suggestion

Mathi Curry can be served hot with steamed white rice or boiled red rice while another popular combination is Kappa (Steamed Kasava or Tapioca) which is one of the staple foods in Kerala.

Bonus Tips:
Sardines need to be cleaned really well even after your fish vendor has done a decent job. It has to be without any stain or blackspots on the inside part and no scales whatsoever outside. Rub them and wash well with crystal salt for extra cleaning.

Coconut used should be really fresh, slightly sweet and full of milk and that makes all the difference.

10 Small Cap Stocks that offer Significant Growth Potential

18 Jan

About two years back, I had recommended some decent midcap stocks most of which appreciated big time even before the current bull run started. I have been, since, trying to dig out some value picks in the mid cap segment but unfortunately, most of them ran up big time – much beyond their fair valuations. Let me concentrate on some pure small cap stocks this time with their underlying businesses holding very good growth potential and stock appreciation for the future.

Important: You may note that many of the stocks listed below, while still offering value, have run up a bit as well. The markets are at near all-time-highs and hence some of these stocks can go down sharply at some point. Hence it would be ideal to buy them in the ranges mentioned or take a staggered approach. Further, never put a lot of money into small caps stocks – not more than 10%-15% of your overall equity portfolio

 

Small Cap Stock Picks

(Company Name, Price on 18/01/2015, Buy Price Range)


1. Chaman Lal Setia Exports (80, 50-60)

2. Gujarat Foils (70, 48-55)

3. Goodricke Group (152, CMP and at dips)

4. Goodyear India (624, 450-480)

5. Hinduja Global Solutions (629, CMP and at dips)

6. JVL Agro Industries (20, 15-18)

7. Jyoti Structures (39, CMP)

8. Noida Toll Bridge Company (35, 24-28)

9. Nucleus Software Exports (199, At dips below 160)

10. Stylam Industries (83, At dips below 60)

 

Criteria for Selection

Some of the criteria used to pick the small cap stock mentioned here are:

  • Industry (Excluded Oils, Chemicals, Steel, Textiles etc)
  • Promoters (How trustworthy are they?)
  • Age & Stability of the company
  • Growth Numbers (Top and Bottom line)
  • Dividend Yield (As applicable)
  • Debt on Book (Zero or Manageable debt)

As you know, the biggest challenge for most small cap companies is managing the debt as they usually avail high interest loans. A big chunk of their profit flows out as interest repayment and that’s probably the main parameter that would define the growth potential of many of them.

Disclosure: As of writing of this post, I am invested in JVL Agro Industries. I plan to invest in at least 3-4 of the above listed companies as and when their stock quotes reach the ranges mentioned.

Disclaimer: I am not a qualified finance adviser or portfolio manager. Please consult the experts before taking any investment decision in the equity market. You may have to do further research on these stocks on financial portals, websites of these companies as well as mandatory filings by them before taking any positions.

Good luck with your equity investments!

Updates

June 01, 2015:

1. Chaman Lal Setia Exports: Hold

2. Gujarat Foils: Hold

3. Goodricke Group: Avoid/Exit (Growth outlook not exciting, Exit on any rally)

4. Goodyear India: Buy in the initially recommended range only

5. Hinduja Global Solutions: Hold

6. JVL Agro Industries: Hold

7. Jyoti Structures: Avoid/Book loss (No debt restructuring seen, Interest coverage poor)

8. Noida Toll Bridge Company: Buy in the initially recommended range only

9. Nucleus Software Exports: Book Partial Profit

10. Stylam Industries: Buy in the initially recommended range only

August 13, 2015:

1. Chaman Lal Setia Exports: Book Partial Profit (Stock already doubled from the recommended date and tripled from the recommended price!)

2. Gujarat Foils: Hold

3. Goodricke Group: Exited (See previous update) (Growth outlook not exciting, Exit on any rally)

4. Goodyear India: Buy in the initially recommended range only, Hold if you already entered

5. Hinduja Global Solutions: Hold

6. JVL Agro Industries: Hold

7. Jyoti Structures: Exited (See previous update)

8. Noida Toll Bridge Company: Hold

9. Nucleus Software Exports: Booked Partial Profit (See previous update), Hold the rest

10. Stylam Industries: Buy in the initially recommended range only, Hold if you already entered (Stock more than doubled from the recommended date/price)

Note: Due to lack of time, I will not be providing any more update on this particular list. The readers are expected to take further research based action on their holdings.

“Food (or Sadya) for Thought” during this Onam!

7 Sep

kerala under massive debtKerala is one of the most gifted states in terms of natural resources, most educated manpower, high health standards, highest life expectancy, women empowerment, rich art & literature heritage and what not? Unfortunately, the state of affairs in “God’s own country” right now is not as green as it looks from 10000ft above the ground reality.

Today, the state is more known for serious issues such as alcohol addiction, high number of suicides, frequent hartals / bandhs, ‘quotation” gangs who commit political murders etc. Most of these problems are caused by frustration among the educated but unemployed youth while the expectation around consumerism and quality life style is quite high for most of these people. Even worse, it has been a borrower state for decades now (no self-reliance) and has a massive debt of 1.15 Lakh Crores (internal + external) at the moment which is said to be at 30% of its GDP! Unfortunately the state’s revenue is not really coming from core sectors such as manufacturing or agriculture but primarily via tax revenues, tourism and money transfer from abroad. Some haste decisions such as the recent alcohol ban – which was taken purely for political gains – is going to aggravate financial trouble for the state with guaranteed spike in unemployment rate as well (The unemployment rate already hovers around 16% – for people below 60 – which is highest among all states in India despite lakhs of people migrating and working in the gulf countries).

So, where did all these problems in Kerala arise? How come each child born here has a high debt burden along with something good numbers such as great high life expectancy and other health indices?

The causes are mostly known to all. Kerala has been a Communist state for many years now and one of the most liberated states due to the same reason where people are more or less equal in terms of their social status, rights to everything in life. I must say that the communism initially was very successful in combating social imbalance and injustice but things changed after a couple of decades of progressive work by the communists and similar revolutionary establishments. Currently, the same passion with which people fight for their rights, is not shown when giving back to the state by showing and committing to their responsibilities. This is exactly why there’re numerous trade union driven strikes, hartals and hence none of the industries would survive in Kerala. Well, trade unions are rampant in many other states too but then their agricultural sector wasn’t affected as badly as it did in God’s own state. In Kerala, even the farmer community wouldn’t be able to do agriculture due to shortage of manpower and those labour class who suddenly decided that they wouldn’t do any job for ‘bourgeois’ in that key sector. At the same time, the same average labour class is willing to do any kind of construction or agriculture related job for much cheaper wages (considering the cost of living) and poor conditions abroad – I am talking about that section of the Malayalees in Gulf countries.

Where does Kerala head from here?

Well, mounting debts may not be a big issue for many other states (some may have even higher debts) in India that have proven track record of agricultural and manufacturing output. But a state like Kerala where the money comes from very limited sectors and tax routes; it is a very serious issue. Soon, the government wouldn’t be able to provide salaries to its employees, repair roads or complete basic (survival) development projects. The state is already in doldrums and it can only get worse from here if corrective actions are not taken immediately by some strong governance, ruthless law making and strict action against offenders.

So, what is the need of the hour?

A few immediate changes are required in the mindset of people as well as the government so that the state can get back on track. The state is entering a point of no return when it comes to its finances and such a situation can result in severe law and order situation and many social issues.

To begin with, for heaven’s (i.e. God’s own country) sake please stop Hartals and Bandhs immediately by force or the right law making. There is no point in observing a state-wide bandh or hartal for the death of a local leader (of any party for that matter) or when Saddam Hussein is executed. Keralites cannot afford to inject huge losses to the state’s exchequer by these forced shut downs several days every year.

Next, it’s high time the state modernized its agriculture sector. In the history of this state, most of the communist revolutions and strikes happened around agriculture sector and farmers. Due to this reason, it was never allowed to grow in terms of implementing modern technologies to fight manpower issues hence resulting in poor outputs except in some crops and spices. Kerala now has reached such a bad state where the basic labour has to come from Bihar, Bengal and UP but at the same time output is not optimal either. Modernizing the agriculture sector with the right technologies is the only way forward for this state as there is not a lot of scope for big things in the manufacturing sector. Self-reliance in food matters is the most important aspect for any state!

Another big issue to tackle is the dangerous consumerist traits that most Keralites exhibit. Most of the visible issues such as alcoholism and suicides are related to high expectations from life and ridiculous levels of consumerist attitude while the money just doesn’t exist. It’s common in Kerala that, those people who can’t even afford a 1-bedroom home always dream of and tend to build a two-storied 3000sqft home. Wedding would be extravagant with tons of gold that the bride wears – no matter how much her father had borrowed. As a highly-literate state, it is high time Kerala bid good bye to such show-off life style. Things wouldn’t change with awareness campaigns alone but enforced harsh laws to address this issue (e.g. very heavy taxes and penalties on big houses etc)

Then there are these very dangerous evils called campus politics and religion based politics. Both these things have drooped to such a bad state where campus elections are fought with vengeance whereas the religious politics is sure to hamper the development ideas that a coalition government might have. Hence the bad politics has to come to an immediate end in Kerala. If any state in India can achieve it, it’s Kerala and it’s time to say ‘NO’ to (bad influence of) campus politics and all religious parties – be it Muslim League, SNDP, NSS or Kerala Congress.

While large scale manufacturing and heavy industries may not be easily possible in such a dense and small state, the manufacturing and industrialization definitely need to leap forward with some big drastic steps. Kerala needs to prove to the outside world that no company will be closed down due to petty strikes called by trade unions and hence a new revolution is realistically possible here. Without having some new industries – other than fisheries, tourism and spice exports – there is no future for this state. Well, it has the bad history of closing down many companies in the 1970s and 80s due to union strikes, but with that part already taken care of (from my first point), it can be a new beginning for Kerala.

Finally, the government should first take measures to improve the financial situation of the state even before deciding to discontinue revenue generating businesses. I am referring to the recent alcohol ban policy here. It may sound unethical to expect that the state should make revenue at the cost of its citizens’ and families’ health and peace (which what the politicians are tapping into), but it’s better than everyone dying out of hunger, right?

Dear country men and political leaders of Kerala, As you celebrate the Onam festival this year, please spare some time to realize where you are heading! Most of the things are in your hand while the new central government definitely can be of good help if some good planning and change of attitude is guaranteed from your end.

(The writer is a Keralite too although living outside the state for quite a few years now)