1. Brokerages’ Diwali 2017 picks that can light up investor sentiment

Brokerages’ Diwali 2017 picks that can light up investor sentiment

The strong purchase by domestic institutional investors cushioned the market against selling by foreign investors and helped the market to hit new highs. Equities could remain the preferred asset class due to low-interest rates and continued buying by domestic investors.

Mumbai | Published: October 19, 2017 2:50 AM
Markets had to deal with uncertainties, first with the introduction of demonetisation and then with the roll-out of the goods and services tax. The strong purchase by domestic institutional investors cushioned the market against selling by foreign investors and helped the market to hit new highs. (Reuters)

The benchmark Sensex rose by 16% since last Diwali — nearly double the gain it registered in the previous year. In this period, the Nifty50 rallied nearly 18%. Markets had to deal with uncertainties, first with the introduction of demonetisation and then with the roll-out of the goods and services tax. The strong purchase by domestic institutional investors cushioned the market against selling by foreign investors and helped the market to hit new highs. Equities could remain the preferred asset class due to low-interest rates and continued buying by domestic investors. Following are some of the stocks recommended by various brokerages that could give handsome returns to investors:

HDFC Securities

Bajaj Auto:
Current market price: Rs 3231.85
Target price: Rs 3,820
With recovering demand in the auto sector, rising incomes in the rural sector, better branding schemes, new product developments/introductions through JVs, good regulatory environment for the 3Ws, Bajaj Auto is set to benefit. This will further improve the return ratios and may help it achieve better valuations.

Divis Laboratories:
Current market price: Rs 877.45
Target price: Rs 1,070
Early resolution of clearance of the two units could lead to a much better FY19. Its stock price could get rerated.

ICICI Prudential Life Insurance:
Current market price: Rs 391.50
Target price: Rs 520
The company has strong financials and a healthy balance sheet. The stock is currently trading at 3.7x P/EV for FY17, which is lower than the recent listing of SBI Life insurance at 4.1x P/EV for FY17.

Kotak Securities

Cochin Shipyard:
Current market price: Rs 567.50
Target price: Rs 740
Cochin Shipyard has a diversified order book at Rs 83 billion and is expected to grow at 20% CAGR with orders coming from the navy, coast guard and the commercial segment. The stock trades at an attractive valuation of 19x FY19E earnings, at a steep discount to bigger international yards with weak earnings profile.

Asian Granito India:
Current market price: Rs 502.25
Target price: Rs 603
AGL is continuously innovating to add new products in the market and has the first-mover advantage in introducing large format tiles with much higher margins.

Engineers India:
Current market price Rs 149.85
Target price Rs 182
The company is well poised to benefit from the recovery in infrastructure spending in the hydrocarbon sector.

IDBI Capital

Manappuram Finance:
Current market price: Rs 103.70
Target price: Rs 142
Specialised NBFCs have operational advantages over banks, and as a consequence, they continue to win market share. The shift from the unorganised sector to the organised sector is expected to gain traction due to Aadhaar, Jan Dhan and demonetisation.
Also, the long-term outlook for gold prices remains steady.

Sundaram Fasteners:
Current market price: Rs 509.85
Target price: Rs 590
The company is expanding capacities of certain products and setting up manufacturing facilities for newer product range to meet the rising demand for its products.

Trent
Current market price: Rs 315.60
Target price: 415
The company’s strategy to expand high ROCE Westside stores, closing loss-making Landmark stores and rightsizing of Star Bazaar, JV with Tesco is likely to improve its financial performance over the coming years.

Anand Rathi

Voltas:
Current market price: Rs 538.65
Target price: Rs 680
Higher traction in international order finalisations, margins improvement in EMPS segment and higher growth in the order book.

India Bulls Housing Finance:
Current market price: Rs 1,359.50
Target price: Rs 1,580
Strong structural drivers and government focus on housing for all by 2022 coupled with growth momentum in mid-income affordable housing.

Deepak Nitrite:
Current market price: Rs 211.95
Target price: Rs 264
With the completion of its Phenolproject, the top line for the company is expected to almost get doubled by FY19E.

Also, due to India’s heavy dependence on the imports due to lack of domestic production capacity and imposition of around 7.5% cumulative anti-dumping duties, the macro scenarios for the domestic market looks promising for the company.

Sundar Sethuraman

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