Sensex and Nifty are sitting well above pre-covid levels, near all-time highs of 56,198 and 16,712.
NSE Nifty 50 may scale 17,745 in the next one year — an upside of 6% from current highs — according to domestic brokerage and research firm Prabhudas Lilladher. “Equities remain an attractive asset class given ample liquidity, low-interest rates and recovery hopes, the brokerage firm said in a report. However, rising volatility and inflow of significant retail money remains a key monitorable, the report added. Benchmark indices have remained resilient since April 2020, recovering from the covid-19 induced sell-off smartly. Now Sensex and Nifty are sitting well above pre-covid levels, near all-time highs of 56,198 and 16,712.
Domestic equity markets have risen on the back of global liquidity infusion and rising hopes of demand recovery amid rising vaccination coverage. “NIFTY EEPS has seen an increase of 3.5% for FY22 and 4.4% for FY23 at 690.5 and 787 a growth of 32.2% and 13.7%,” the brokerage firm said. Estimates pegged by Prabhudas Lilladher are higher than consensus by 4.2% for FY22, and 3.5%/-0.2% for FY23/24. NIFTY is currently trading at 22.6x 1-year forward EPS which shows 12% premium to 10 year average of 20.1x.
In the base case scenario, analysts value Nifty at September 2023 EPS of Rs 840 a 5% premium to 10-year average PE (21x) and arrive at the September 2022 target of 17,745. On the other hand in a bull case scenario, the brokerage firm has upped its target for Nifty to 21,020 from the earlier 18,850. “Third Covid wave, lower bond-buying by FED, Repo rate increase by RBI, global capital flows and geopolitical instability are key risks to bull case scenario,” they added.
Large-cap stock picks
HDFC Bank – Buy
Target price: Rs 1,870
The brokerage firm has a buy rating on the stock and is overweight HDFC Bank in its model portfolio. Analysts believe HDFC Bank will see revenue growth of 12.1% in 2022 and 15.8% in 2023, while earnings will grow 17.5% and 19.9%. HDFC Bank’s management said that collections were picking up in June and were rapidly improving in July. The targe price for HDFC bank implies a 20% upside from current levels.
Mahindra & Mahindra – Buy
Target price: Rs 961
The stock is a new addition to Prabhuas Lilladher’s model portfolio, with an overweight of 0.4%. The management of Mahindra & Mahindra believes tractor sales will grow in single digits in the financial year 2022. For personal vehicles, the trend remains strong for Thar with a 10-month waiting period and a strong pipeline for Bolero neo. So far this month, the stock has surged more than 6% to now trades at Rs 776, which still leaves an upside potential of 23.8%.
Indraprastha Gas – Buy
Target price: Rs 662
Analysts believe Indraprastha Gas to report revenue growth of 25.8% next year and 19.1% in the year after that. Although IGL reported lower than expected volume growth owing to the pandemic, it still remains a preferred stock for analysts. The stock has gained just 3.6% so far this year. To reach the set target price the stock will need to rally 25.8%.
Hindustan Petroleum Corporation – Buy
Target price: Rs 404
HPCL stock price has jumped more than 16% so far this year and there could be more upside for the stock. Prabhudhas Lilladher expects the company to report earnings growth of 6.1% in 2022 and 12.2% in 2023. The target price of Rs 404 implies a 57% upside from the current levels of Rs 257.