Since the beginning of the year, benchmark indices in India have been virtually flat. On Jan 1, 2015, the Nifty ended the day at 8284 points, and on Oct 22, we are at 8261 points.

The Sensex too has declined from 27,507 points on Jan 1, to the current levels of 27,304 points. It's unlikely that the index would go up in a hurry from the current levels and one needs to identify stocks that have the potential to gain.

Bank of Baroda

The bank has recently been in the eye of a storm following forex violations. However, at the current level the stock makes a good pick. In fact, the stock has fallen from Rs 190 to levels of Rs 176 recently.

Bank of Baroda is the country's second largest government owned bank. There are a few positives for the bank in the last few months. One is that the bank has appointed a new CEO from the private sector, an experiment that could well take-off.

P S Jayakumar, a Chartered Accountant and a former chief executive of VBHC Value Homes, has recently taken charge as MD and CEO of the state-owned Bank of Baroda. This could augur well for the bank in the coming years.

Secondly, the capital infusion by the government in government owned banks is a big positive for Bank of Baroda. The biggest problem for government owned banks has been non performing assets. Bank of Baroda has also witnessed a deterioration in its gross non performing assets, which climbed from 3.71 per cent for the March quarter to 4.13 per cent in the June quarter.

However, it is likely that non performing assets may have peaked at the current levels. With the gradual improvement in the economy, it is possible that non performing assets could reduce going forward. This could be a big trigger for the stock. Bank of Baroda could report an EPS of at least Rs 25 in 2016-17. This would mean a p/e of just 8 times the current price of Rs 176. The stock has the potential to reach Rs 210 in the next one year.

Talwalkar's Better Value Fitness

Talwalkar's has been an early player in the fitness business, through a number of Gym's that it owns. The stock is a good pick at the current levels for a number of reasons. One is that the company follows a very asset light model, with an emphasis on increasing sales at the same centres. Recently, the Company implemented franchisee owned centres (HiFi). This is expected to generate a good amount of franchise licensing fees in the coming years.

The company has some very good and varied offerings such as NuForm,Reduce and Transform. The company also opened a 10,000 sq feet centre recently in Hyderabad.

Coming to fundamentals, Talwalkar's Better Value Fitness can report an EPS of Rs 19 and Rs 22 for 2015-16 and 2016-17. This translates into a p/e of 13.2 times and 11.54 times respectively for 2015-16 and 2016-17 at the current market price of Rs 254. For a stock that is more of retail bet, it deserves a better valuation. The stock has the potential to rise to Rs 350 in the next one year.

GoodReturns.in