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RAJIV KAPOOR
TAKING STOCK

Rajiv Kapoor is a Share Broker, Certified Mutual Fund Expert and MDRT Insurance Agent.

Colgate Palmolive stock is a good buy

The sharp crack in the Chinese stock markets and the uncertainty around the timing of the US Fed rate hike were worrisome for both investors and traders alike and the Indian benchmark indices saw a sharp sell off like most markets around the globe.

The Indian markets slipped during most part of last week after increased concerns over slowdown in the world's second largest economy, China, which decided to devalue its currency, Yuan. The benchmark indices closed at a two month low below their crucial 27,400 (Sensex) and 8,300 (Nifty) levels. While foreign investors and brokers made a decent attempt in the last leg of trade for a small recovery by purchasing stocks in the FMCG and pharma counters. As if global bearish sentiments were not enough to traumatise the Indian stock markets, comments from the government on the ownership of investment through P notes again came to haunt the foreign portfolio investors. For a common investor to understand what a P note means — it is a derivative instrument issued abroad by a foreign institutional investor against underlying Indian securities and allows him to make money in the Indian stock market without going through the hassle and significant cost of directly investing in the country. Global markets meanwhile have become increasingly nervous over fears that the Chinese growth rate is slumping and it could cause a cascading and wide ranging effect on the 3C's — currencies, commodities and countries — in a major way. While in our country what one sees and reads in the media is all good for the foreign investor as they feel India is better positioned among other nations and among better places to invest in. And the reasons are that CAD is under control, inflation is low, structural reforms are in progress (albeit slow), growth figures are set to improve next year, etc.

The realty sector has been reeling for the last two years with shrinking demand, delay in existing projects, tightening of black money, increase in circle rates and high borrowing costs and an important suggestion has been made by our RBI governor. If home builders want to clear their unsold stock, they will have to bring down prices and once prices stabilise, then more and more people would be interested in purchasing houses. Let's see what the reaction is by the builder community before the next RBI policy meet on 29 September. Among major positive news this week concerning India has been oil price piercing the $40 mark, launch of new payment banks and government clarifying about limited impact being seen in the decline in Rupee due to low inflation.

Colgate Palmolive India Ltd equity stock has been hovering in the Rs 2,000 levels for the last one month on the back of news by the company announcing a bonus issue of 1:1 to existing shareholders. While the industry is facing intense competition and a challenging demand environment, it has posted a resilient 5% increase in volume growth and market share gains in the toothpaste and tooth brush segments. Most analysts expect the growth momentum to continue in the future and have therefore put a buy on the ColPal stock at the current market price of Rs 1,990 with a price target of Rs 2,200 in two months time frame.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

 
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