Global economies including ours are changing very fast and therefore investors need to make suitable changes to their portfolio. For instance, IT stocks were market favourites a year ago, but recently the whole sector was facing challenging times. Now suddenly, this sector has again become highly fancied by fund managers as the rupee has depreciated against the dollar. Portfolio re-structuring is equally important as to stock picking. Our advice would be to partly book profit to the extent of 40% in stocks which investors have purchased in recent times. Keep the cash ready, as volatility can offer you very lucrative opportunities. You can use these opportunities to pick your favourite stocks for long term gains. One such stock moving in a narrow range for two months or so is blue chip conglomerate L&T. Larsen and Toubro, or L&T, is a widely known Indian company. Broadly, its activities can be divided into the following segments — infrastructure (engineering and construction); power (solutions for thermal power plants); metallurgical and material handling (solutions for ferrous and non-ferrous metal industries); heavy engineering, electrical and automation; hydrocarbon (oil and gas industry); IT and technology services; financial services; developmental projects; realty and ship building.
Q2 FY17 showed revenue growing by 8% to Rs 24,923 crore, while profit after tax was higher by 41% at Rs 1,032 crore, as compared to the same period last year. There have been a fresh inflow of orders to the tune of Rs 31,119 crore, which is up 11% on a year on year basis. A majority of these orders have been received from the infrastructure sector in the domestic market, while the hydrocarbon business has come from the international market. Profitability of the hydrocarbon sector has improved substantially and it could contribute to the overall margin growth of the company. The consolidated order book of the group stood at Rs 251,773 crore, as on 30 September 2016. The company was in the news when it shed 14,000 employees in six months of the current financial year. This large employee base constitutes nearly 11% of the total workforce. Many changes are taking place on many fronts for the company. With falling interest rates, closure of legacy projects, lean manpower, focused approach and burgeoning order book are all set to change the company’s prospects in the coming two-three years. This makes L&T a solid bet for investors, who must buy this blue chip company share for their portfolio. The stock currently quoting at Rs 1,360 can be bought for a price appreciation target of Rs 1,510 by end of Jan 2017 around the time of the Union Budget. There is huge expectation that the govt will introduce thrust in the infra sector in the Budget and L&T could be a major beneficiary.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.