PART I: Pros pick the best stocks for 2001

Sharekhan.com Head of Research V Subramanian

On sectors:

I think it is better to be a company specific player rather than a sector level player. The focus should be on what stands for a reasonable level of value. Growth should be a criterion, no doubt, but it has a price to go with it. The critical situation is growth at a reasonable value.

On stockpicks:

My top picks are Infosys, Birla 3M, Hindustan Construction and Kotak Mahindra Finance. I don't think you can avoid software and consolidation is likely to occur with Infosys in the future. As for Hindustan Construction, I would pick this scrip given the current level of activity in the construction sector. In the case of Kotak Mahindra, the restructuring that is going in this company should make it a good option.

Jet Age Securities Director Ajay Kejriwal

On sectors:

Software services and pharma would be my choice. In software services, large companies will continue to do well. Growth rates might have fallen in this sector but they are more than that achieved by other sectors in the economy. The pharma sector enjoys steady growth as sales are not dependent on the state of the economy.

On stockpicks:

My top picks are Infosys, Hughes Software, HCL Technologies and Cipla. It is always better to bet on good horses and these companies are essentially good players in the respective fields.

However, I think that 2001 might not be a good year for stocks. Internationally, there has been a slowdown in economies. Money moves to the safest places - the US and Europe and not to the emerging economies like India. This year (in 2000) FII inflows have been small. I don't see how that is going to increase. Key indicators in the second quarter point to a slowdown of the economy. Auto sales have dipped, consumer goods companies have decreased ad spends. All these point to company margins being under pressure. If profitability is low, the stock markets won't do well. However, long-term predictions are difficult given the increased volatility in the markets.

Cholamandalam Cazenove Mutual Fund CEO Ved Prakash Chaturvedi

On sectors:

I believe in three main themes for the coming year, not a sectoral approach. One is the comparative advantage theme - these would include sectors like IT and new economy sectors, among others. Then there is the infrastructure opportunity theme. These would include the telecom equipment providers and construction sector. Then there is the middle class wealth creation theme. This would broadly have sectors like FMCG.

On stockpicks:

Under the comparative advantage theme, I would pick Infosys and Wipro as I think growth rates in them would sustain. Under the infrastructure theme, I would pick L&T and Bhel as their growth rates have been good. Under the third theme, I would pick ITC.

IDBI-Principal MF CIO Rajat Jain

On sectors:

The year ahead will not bring out any one sector in the limelight. In fact there will be no broad theme that could be followed. Nonetheless, the sectors that could be performing the most on the bourses are retail, healthcare and, of course, software. Software is expected to bounce back even after the recent hit it has taken. The sector will be the one to look out for in 2001 as well. The current spurt of interest in 'old economy' scrips does not spell better performance in a big way for these sectors. Among old economy sectors, only a few have been performing, mostly cement and engineering. The reasons for their performance do not lie in better fundamentals. It was more a case of bounce-back from a highly undervalued position and the smashing these sectors had taken before. The reasons have been sector-specific as well. The hike in cement prices and the underlying cartelisation among players has driven the positive sentiment in them. I won`t consider the old economy sectors to have a major role to play again this year.

On stockpicks:

My company does not speak on individual stock picks.

Fund manager of MF promoted by large industrial house (anonymity requested)

On sectors:

I expect the pharma, FMCG and media sectors to do well. The markets as a whole will depend on the pace of progress on the divestment front, economic growth, and FII inflows.

On stockpicks:

My picks are ITC, Reliance, Pfizer, Nestle, Sterlite Optical and Tisco. The tech euphoria is over. Sanity will now guide the market as it was two years back. The guiding factors will be the fundamental strengths of the companies and their business models.

VC Mehta Shares & Stocks CEO Jigar Mehta

On sectors:

I feel that stocks in sectors like cement, software and media will be the major gainers in 2001. The continuous increase in cement prices along with rising demand will benefit cement manufacturers. Media stocks are likely to see a boom in the next year. In the software sector, only select fundamentally sound stocks will remain gainers. In the telecom sector, much would depend on government policy as the entry of foreign players might give tough competition to domestic players.

Overall, I am bullish on the markets next year. But they may remain subdued in the initial part of the year. The Sensex is likely to move up steadily and could cross the 5,000-mark within the year. But the chances of it making a new historic high, as it made during 2000, are less.

On stockpicks:

For the year 2001, I would like to recommend stocks like Balaji Telefilms, Mukta Arts, ITC, ACC and Infosys. I find Wipro a good long-term investment at its current level. Also Thermax and Bharat Earth Movers look good for long-term investments.

Nilesh Shah of Templeton Mutual Fund

On sectors:

Information technology sector will still be our main focus and we will stay invested in topline IT stocks. On the issue of US economic slowdown and the expected cut in IT spending, it is too early to comment on it and there is no guarantee that the US economy is heading for a recession. Also it will not affect Tier-I IT companies much. Investors can stay invested in the IT sector with a long-term view of six to nine months and expect decent returns from the current level.

The other sectors to focus on will be pharma, cement and FMCG. The cement sector looks attractive and it seems that the recent price hikes will remain and will improve the profitability of cement companies.

The results of the topline Indian stocks for the third and fourth quarters will be encouraging and will maintain the same growth rate as in the past few quarters. We don't foresee any slowdown with respect to these companies for this year.

On Stockpicks:

The best bet in information technology sector is still Infosys, followed by Satyam Computer and SSI. Plus there are SmithKline Beecham Consumer in the FMCG sector and SmithKline Pharmaceuticals in pharma sector.

Source: Investment Research Information Services Limited (IRIS)

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