For the past 6 years, Nifty and Sensex have lingered at the same levels. For the last 3 years in particular, the Nifty has been oscillating in a broad range of 5,500-6,300. Nifty is again close to its previous high and the Sensex has gone on to record a new lifetime peak on Friday.

There is a broad consensus that economic conditions in India have bottomed out. But is it really so? Yes. However, I believe that the Indian economy would consolidate in the forthcoming four to six quarters as the issues with savings, private investments, interest rates and rupee depreciation get sorted out to improve industrial output, inflation and GDP numbers.

Only a few investors have made money in this range-bound market. These are investors who gave less importance to index levels and concentrated on bottom-up approach to investing. Under this approach, more importance is given to a company’s product, business and management, compared to macroeconomic factors.

My theme of investing for this Muhurat trading would be companies that would benefit from higher rural spend, import substitution, export business and stocks offering high dividend yield. Some of our top picks are Hero MotoCorp, Lupin, Infosys, Britannia and Asian Paints.

Hero MotoCorp is the best play on the rural income growth. Taking a cue from the management guidance, a 300-500 bps margin expansion would bode well for the stock. Moreover, fears of market share loss (post the split with Honda) have now abated. The company continues to aggressively launch new products and maintain market share. The stock trades approximately 14 times FY15 estimated earnings and remains our top pick in the sector. Lupin is one of the best placed players among Indian pharma companies owing to its differentiated approach and uniqueness in product offering.

With strong growth in the US generic business in the past and a robust potential for developing and launching new drugs, we believe Lupin can continue to show healthy growth for the next three years.

We are looking at 16 per cent compound annual growth rate sales growth and 18 per cent EPS growth over FY13-FY15E. Besides, Lupin also stands to benefit from a depreciated rupee.

Stocks such as TNPL, Allahabad Bank, GNFC and KEI Industries offer high dividend yield ranging between 8-10 per cent.

I would recommend L&T due to the expected improvement in the economy and it’s available at an attractive price. A robust order book coupled with strong balance sheet will help the company maintain/expand its book-to-bill ratio. The in-line valuations with the broader market make it a compelling buy.

The stock trades at approximately 14 times FY15 earnings with an EPS of Rs 68.

Besides equities, investing in tax-free bonds offering interest rate of 8.5 per cent plus tax-free yields is a very good option for investors with a long-term investment horizon. Given their high rate of interest for 12-18 months, debt instruments such as Fixed Maturity Plans offered by mutual funds is another good choice.

They offer attractive post-tax returns as investors can avail benefits of indexation by choosing plans for more than 12 months.

I wish all the readers a very happy and prosperous Diwali.

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