Policy inaction, high current account deficit and fiscal deficit, weak rupee and resurgent inflation have been the significant headwinds for Indian stocks.
The Nifty index which is closely tracked by analysts, has broken long term support levels and is now trading in a bearish territory.
However, global banking major BNP Paribas says most top-down valuation measures indicate market could be close to bottoming out and there might be at most 3-5 per cent downside from the present levels. BNP's 2012-end Sensex target remains 18,500.
The recent decline in commodity prices is good for the Indian macro environment. The postponement of GAAR provisions and the possibility of change in some of the onerous conditions (like burden of proof on taxpayers) should reduce foreign investors’ concerns slightly, BNP adds.
Here are 10 stocks recommended by BNP Paribas that might outperform the broader markets given the weak macro-economic environment. These are long term calls.
Focus on companies with good execution, cash generation, good return ratios and no management related concerns.
Good stocks at reasonable prices
1) Hero MotoCorp - target 2050
2) Tata Motors - target 375
3) Mahindra & Mahindra - target 800
4) Idea Cellular - target 120
5) Cairn India - target 355
6) PowerGrid Corporation - target 122
7) L&T - target 1500
8) NTPC - target 206
9) SAIL - target 109
Market recovery plays
10) ICICI Bank - target 984
11) SBI - target 2258
12) Wipro - target 475
(Sources from BNP Paribas report titled India Market Outlook: Islands in a sea of gloom)