The last year 2017 may have been an excellent year for the equity markets, however many experts and top market voices say that it will be a challenge for the indices to return as much in 2018. Top research firm CLSA is bullish on real-estate and corporate banks in 2018. “The real estate sector looks well poised in 2018 as well. A lot of stocks have gone up materially last year but 2018 to my mind is going to be another very good year for the sector. The primary reason is one is obviously the RERA which is driving industry consolidation which helps the large listed organised sector players and we are also expecting the housing sector to start reviving,” Mahesh Nandurkar of CLSA told ET Now in a recent interview.
But what kind of stocks should investors look to buy in the year? “ On the first one, real estate developers are clearly one of the biggest beneficiaries but the entire chain starting from the housing finance companies, the building material segment including cement and non-cement, building materials as well like pipes, some of the low ticket consumer durables which are used in households like the lighting, the fans etc. — those companies should also benefit along with the real estate developers. This entire sort of chain related to the housing related activities should do pretty well in 2018,” the expert noted.
Why is the research house bullish on the corporate bank sector? “And the second sector that we are quite optimistic on is corporate-oriented banking sector. The worst in terms of the NPL cycle is now pretty much behind. There will be some provisioning related issues that might still come up over the next three to six months as some of these NPLs get resolved and the banks take haircuts. But by and large, a lot of those risks are already priced in according to me. Therefore the corporate oriented banks should be doing pretty well in 2018 as well,” Mahesh Nandurkar told the channel.
Regarding top stock bets from the two categories, Mahesh Nandurkar pointed out in a recent note, “A recovery will be further aided on the recapitalisation of PSU banks and continued momentum in equity raisings. Our top picks are HDFC, ICICI, IndusInd, L&T, M&M, Lupin, NTPC, Godrej properties and Crompton Consumer.” The house has a target price of Rs 2,060 on the shares of IndusInd Bank implying an upside of more than 25% from the current market price of 25%. From the real estate space, the Hong-Kong based firm is betting on Godrej Properties. CLSA has a target price of Rs 873 on the shares. The shares were trading at Rs 710 this morning. The target price implies an 23% from the current market prices.