Amid ongoing volatility in the stock markets, investors seek to invest in stocks with attractive returns ahead of Diwali.
Amid ongoing volatility in the stock markets, investors seek to invest in stocks with attractive returns ahead of Diwali. While Sensex returned about 11 percent since last Diwali, the Nifty has given nearly 10.40 per cent in the same period. Several brokerages have come out with stock picks for investors ahead of Diwali. The latest report by Religare Broking says that with improving demand ahead of the festive season and easing liquidity conditions, the automobile industry is expected to perform well going ahead. Mahindra & Mahindra and Maruti Suzuki are the top two auto stocks that are a good bet for the investors, the brokerage said.
Mahindra & Mahindra
Even as Mahindra & Mahindra (M&M) saw a sharp correction in the share price in the previous year owing to the cyclical downturn in the auto industry, the tractor sales are expected to get better. The normal monsoon, easing liquidity conditions and lower interest would support domestic sentiments, Religare said in its report. “M&M’s automotive segment is likely to witness challenges due to an increase in competitive intensity and BS-VI implementation. Nonetheless, we believe that these concerns are largely factored in and the core business is available at attractive valuations,” it added. The brokerage recommends a Buy on the stock, valuing the core business at 12x and arrive at a SOTP based target price of Rs 695.
The worse for Maruti Suzuki India Limited (MSIL) is expected to have ended, Religare said in the report. The stock may see a gradual recovery from the second half of the ongoing fiscal on account of expected festive sales demand, recent government measures and favorable base effect, it added. “MSIL is better placed than peers in the PV space given its leadership position, strong product portfolio and wide distribution network. Further, MSIL is likely to be a key beneficiary of BS-VI transition (April-2020) due to its higher share of petrol vehicles and limited price increase in majority of its product portfolio,” the report also said. The brokerage recommends a Buy on the stock with a target price of Rs. 7,936.
(Please consult your financial advisor before making any investment-related decision)