Stock picks of the week: 5 stocks with consistent score improvement and upside potential of up to 37%

As more stocks from different sectors see an improvement in their analyst scores, it is important to be selective before being bullish when looking at stocks. The selected stocks depict a strong upward trajectory in their overall average score which is based on five key pillars i.e. earnings, fundamentals, relative valuation, risk and price momentum. This implies that there has been a significant improvement in their market outlook in the given time frame.

Historical data shows that the first quarter of the financial year has by and large been positive for Dalal Street. The positive start to the quarter this time has, therefore, brightened prospects for the history to repeat itself.

The movement of nifty and sensex needs to be delinked with what has happened in the last quarter and what might happen to mid-cap in the coming quarter. There is no way one can fight with liquidity, if it is going to mid caps and they are moving up irrespective of valuations or quality of stocks one cannot argue. But the only thing which as an investor one can do is to be careful when taking exposure to this segment of the market. Stay away from stocks where there is a narrative that this sector will do well because of XYZ reasons. At this point of time there is no dearth of tips floating in whatsapp group and telegram channels. But there is enough evidence in history to show that more than anything else, it is time to use checks and balances while making investment decisions.

Despite the recent correction, valuations are still high from every perspective. Because they have stayed at elevated levels, to some it might appear as a new normal. But the fact is that stretched valuations have never been and never will be the new normal. So, sooner or later, the street will start the process of valuation adjustment. First signs that markets are getting close to starting the process are clearly visible on the wall. Adjustment of valuations is a process, which does not end in one day, though it starts in one day. It would be worthwhile to make adjustments to the portfolio by shifting to more defensive sectors. ET screener powered by Refinitiv’s Stock Report Plus lists down mid and small cap stocks from the FMCG sector with high upside potential over the next 12 months, having an average recommendation rating of “buy” or strong buy .

When valuations are high but sentiments are bullish, it would be better to add the word “ caution” to your portfolio. Now how does one do it ? By putting some quantitative parameters when making a decision to buy a stock. Refinitiv’s Stock Report Plus which lists stocks with high upside potential over the next 12 months, having an average recommendation rating of “buy” or strong buy .

As the nifty once again forms a new high, the mood of the markets is clearly bullish, but this bullish trend is clearly coming at a time when valuations are high. So be selective, avoid impulsive investing, and keep reviewing one’s portfolio and stay away from penny stocks especially. We look at stocks which have witnessed a continuous rise in their score in the last one month. Coming on the list are stocks which are from different sectors and some which have seen an uptick in score after a long time. These selected stocks depict a strong upward trajectory in their overall average score which is based on five key pillars i.e. earnings, fundamentals, relative valuation, risk and price momentum. This implies that there has been a significant improvement in their market outlook in the given time frame

Probably the debate on valuations is over or even if it is taking place, the majority has accepted that yes valuations are high but at the same time liquidity is also high which is ensuring that the street is under the control of bulls. Now there is enough historical evidence to show that valuations matter and justifications don't stand the test of time. Now to take care of the valuation factor, investors looking to invest in midcap space should just push the filter levels a bit higher and should look more closely at business and financial parameters before investing. Right from whether the trend in promoters shareholding to dividend track record to what is the debt situation. Some hard work will ensure that when the street gets into a mode of correction, probability and yes only probability of relatively less drawdown in portfolio value.