Top Contra Stocks to Buy in India for 2018

Indian market sentiment is weak due to various scandals related with Banks and the recent data of current account deficit (CAD) released by RBI . Global cues are also weak before the US Federal Reserve meeting, which is expected to raise US interest rates. Investors are cautious therefore looking for contra stocks to buy which should not fall much compared to the market.

According to the recent release, in the December quarter, CAD widened to 2 per cent of the GDP at USD 13.5 billion, up from 1.4 per cent in the year-ago period, driven by a higher trade deficit.

Contra Stocks to Watch

The contra stocks that investors may have in their portfolio include, Chambal Fertilizers, Dish TV, Canfin Homes and Dabur.

Chambal Fertilisers & Chemicals Limited (NSE: CHAMBLFERT)

The shares of the fertilizer companies surged after a three-year extension in the existing urea policy from 2017-18. Therefore, there will be no increase in the price of urea till 2020. This sector is also expected to benefit as the Elections are due in 2019.

The company’s new urea project is progressing well and the company expect to achieve the commercial production as per schedule by January 2019. In the third quarter, the company has reported approx. 30% growth in the PBT from continuing operation and 14% growth in PAT from continuing operation. The stock can move towards the level of INR 185 in a year time.

Dish TV India Limited (NSE: DISHTV)

This stock is trading near its 52 week low level. Dish TV has planned to deploy return path data (RPD) technology in its hybrid set-top boxes. The company has 16 million boxes, out of which 3 million are hybrid ones eligible for RPD measurement. Currently, Malaysia is the only market, which is measuring the viewership with RPD and Dish TV’s initiative is of first of its kind in India.

Moreover, the stock will benefit cost savings arising from the merger with Videocon d2h, the combined entity is expected to be listed soon. Therefore, the stock is expected to perform from FY 19.

Can Fin Homes Ltd (NSE: CANFINHOME)

Due to strong traction in loan book expansion and having strong asset quality, it is expected that the company will deliver 2% plus RoA over FY 2017-19. Further, it has strong presence in southern market. Baring Private Equity Partners Asia and HDFC are in the final race to acquire Canara Bank’s 30% stake in CanFin Homes, which is valued at around Rs 2,000 crore.

In 2017, Canara Bank had sold 13.5 percent stake of CanFin to GIC of Singapore for Rs 753 crore. In the latest third quarter, the company has posted the net profit after tax of INR 8009.99 lakhs.

Dabur India Ltd (NSE: DABUR)

The company is expected to perform better in FY 19 compared to FY 18  due to low base and the second quarter is expected to better than the first quarter driven by government spends and good monsoons. Dabur in the third quarter has posted 13% growth in the consolidated profit after tax, 28% growth in the consolidated operating profits and operating margins had expanded from 18% to 20.5%.

Further, the company is expected to grow in mid-teens due to its good margins. The company is expected to grow through market share gains, deeper rural penetration, better category management etc.

Overall, the investors should keep an eye on its portfolio and market. The contra stocks are there to give good returns compared to the market, but very high returns should not be expected from it.