As we know its a real hard time for Indian Market and one of the most disastrous times for Infrastructure sector particularly. As per the figures The CNX Infrastructure index has slipped more than 13% in the past four weeks compared to the 10% fall in the broad-based Nifty. The difference widens when we look at long-term returns. In the past three years, the infrastructure index has dipped 40% while the Nifty has risen marginally by 1.5%. This is more than shaking for any investor. An in-depth analysis shows that delay in projects is accountable for such a dismal situation for this sector. Most analysts had expected a large number of road project tenders floated by the National Highways Authority of India in the January-March period. But they are worried now because there is no news yet on that front. Several irrigation projects have also got delayed because of the political turmoil in Andhra Pradesh. Furthermore, Land acquisition for power and road projects has not been as swift as expected, leading to a logjam at the execution stage, which pushes up the costs for the companies. A third problem is the delay in payments (both for government and private contracts).
Anyhow this sector cant be considered that dim to keep your hands off. Experts believe the valuations of some infrastructure stocks have been beaten down to very attractive levels. Abhay Aima, director of HDFC Securities, believes that sectors such as infrastructure that have lagged behind in last year’s rally will outperform the broader market this year. Such view may be profitable for the long term investor who can withstand short term pains to a considerable level. Reasons to believe on this sector points towards the corrective measures requisite for maintaining 8% GDP growth by the government. This means that an investor with a 3-4 year investment horizon can reap rich rewards by picking up infrastructure stocks at reasonable valuations.
Here are a few stocks worth considering.
1. Larsen & Toubro ->
1- yr return->12.36%
Analysts' recommendation-> Buy-29 Sell-2
Reason-Since financing remains the major concern,L&T with financial muscle will be able to tide over the problems. Also its Market Capitalization in many other sectors reduces the impact of slowdown in any particular sector. Its valuation has severely come down.
2.NTPC ->
1- yr return-> -9.95%
Analysts' recommendation-> Buy-24 Sell-5
Reason-India has a power deficit of over 11%. So domestic power producers will continue to grow faster than the GDP growth rate. Analysts believe that the earnings of NTPC, the largest power producer in India, will zoom because of the addition of 5500 MW in 2011-12 and another 5300 MW in 2012-13.
3.TATA POWER ->
1- yr return-> -1.65%
Analysts' recommendation-> Buy-17 Sell-1
Reason-Power sector expected to bloom up as mentioned above. Also, Tata Power is the most efficient power producer in India and so is another potential candidate for investment.
4.PTC India ->
1- yr return-> -7.6%
Analysts' recommendation-> Buy-16 Sell-0
Reason- PFS (PTC Financial Services)is an infrastructure financing company with 26% equity exposure in several power projects. Due to 26% equity exposure, quite a part of the profit expected in future to be rewarded to the investors.
My take-> Well there is a lot of theory and analysis involved. I reckon more caution as this sector is prone to more downfalls considering short term performance. For the strong hearted ones this can be a hefty opportunity. I give this report and analysis a thumbs up. But suggesting further analysis from investors also on this sector and stocks recommended above.
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