After a recent run-up in the Indian bourses, brokerage houses HSBC and Sharekhan said that domestic markets are not cheap any more. Benchmark BSE Sensex, which tumbled 3 per cent in the first quarter of the ongoing calendar year, gained 5.4 per cent in the ongoing quarter till June 10.
HSBC feels Indian equities are overpriced now and Sensex is in for a correction, which may slump to 26,000 by the end of 2016.
Gaurav Dua, head of research, Sharekhan, “Indian markets are not cheap now after the recent bull-run.”
On the other hand, the 30-share index hit a 7-month high last week, pushing brokerage Ambit Capital to raise its year-end target to 29,500 by the end of the fiscal. Morgan Stanley has a ‘bull case target’ of 30,000 by March 2017.
In a scenario where brokerage houses have mixed views on the further movement of domestic benchmark indices, we collate a list of stocks from a research reports of various brokerage houses on which they are bullish on in the present market condition.
Recommended By: Sharekhan
Investment Rationale: The stock has delivered 49 per cent returns over the last 7 months. Going forward, Sharekhan believes Welspun India would continue to deliver consistent performance, which would keep the stock buoyant. Therefore, despite its strong outperformance, the brokerage house continues with its positive view on the stock and expects it to deliver around 10-15 per cent returns from the current level in the medium term.
Recommended By: Nomura
Investment Rationale: Fortis expects double-digit revenue growth coupled with EBITDA margin improvement in its hospitals business during FY17F. The company expects the ARPOB (average revenue per occupied bed) to improve on the back of a favourable customer mix (driven by an increase in medical tourism) and better product mix. Fortis expects medical tourism in India to increase by 40 per cent year-on-year in FY17F. Nomura has ‘Buy’ on Fortis Healthcare with target price of Rs 238.
Recommended By: IndiaNivesh
Investment Rationale: The management expects double digit volume growth for FY17E. During FY16 overall volumes of the company grew by 5.5 per cent YoY (vs flat 3-wheeler industry growth) to 33,893 units. Domestic volumes registered growth of 5.5 per cent YoY (vs 1.03 per cent growth of domestic 3w Industry). IndiaNivesh believes Atul Auto is likely to benefit from increase in rural income and spending on the back of good monsoon expected in this year. The company has strong presence in semi-rural and rural market. The share price of the company can touch Rs 540.
City Union Bank
Recommended By: IndiaNivesh
Investment Rationale: City Union Bank (CUB) with expertise in MSME financing and strong understanding of local markets (ie Tamil Nadu) has taken advantage of growing MSME sector. CUB, as a business strategy, has focused on short term MSME advances which have led to consistent over 20 per cent yoy growth. In Q4FY16, bank has maintained MSME loan growth at 20 per cent and overall loan growth of 17 per cent yoy. Further the MSME book now constitutes 34.3 per cent to total loan book as against 27 per cent in FY12. IndiaNivesh expects loan growth of 17 per cent CAGR for FY16‐18E as against management guidance of 15‐18 per cent for FY17. The brokerage house has ‘Buy’ on CUB with target price of Rs 118.
VST Tillers Tractors
Recommended By: Motilal Oswal
Investment Rationale: Fragmented land holdings of farmers in India has opened up huge opportunities for power tillers which costs around Rs 1.25 lakh vs Rs 2.5-8 lakh for a tractor. Given government’s thrust on increasing farm productivity through greater penetration of farm mechanisation, power tillers may turn out to be the preferred farm equipment by choice for domestic farmers. VST being the market leader in Tillers with nearly 50 per cent share is poised to gain. The share price of the company can touch Rs 2,250 in the next few quarters.