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Reliance Industries, Bharti Airtel, SBI among top stock picks; check full list from HDFC Securities

After having fallen more than 3.7% each last week, Sensex and Nifty have started this week’s trade with gains. However, many analysts still advise investors to remain cautious.

Other stocks picked by HDFC Securities include Aegis Logistics, CDSL, HPCL, Thermax, and TVS Motor Company. (Image: REUTERS)

Domestic stock markets have been witnessing heightened volatility recently along with global peers amid multiple headwinds. After having fallen more than 3.7% each last week, Sensex and Nifty have started this week’s trade with gains. However, many analysts still advise investors to remain cautious. Amid this, HDFC Securities has picked stocks that they believe investors can buy with a minimum of 6-12 month horizon via SIP route. These include marquee names such as Reliance Industries, ICICI Bank, State Bank of India and many more.

Reliance Industries

The largest-listed private company in India is among the stocks picked by HDFC Securities. “RIL has strong competitiveness in the global oil refining and petrochemicals business, arising from its integrated business model with a superior Complexity Index of 21.1 for its Jamnagar site, which makes it amongst the most complex sites in the world. RIL has also established its presence in the consumer-facing business space by providing retail and digital services,” the brokerage firm said. Volatility in crude oil prices, currency volatility, regulatory and policy changes in the Telecom business, and competition from other organized retailers in the Retail business are some of the risks associated with the stock. RIL’s share price is up 2.3% in 2022, trading at Rs 2,460 per share.

ICICI Bank

ICICI Bank is the second-largest private sector lender in the country. “Over the years it has consistently focused on de-risking its loan book by reducing corporate portfolio and focusing on high margin less risky retail segment,” HDFC Securities said. The brokerage firm added that ICICI bank is well-positioned to structurally report superior return on assets. “Substantial decline in gross non-performing assets, improvement in cost of funds and change in loan mix augurs well for future growth.” In 2022, the stock has tanked 10% and now trades at Rs 687 per share.

State Bank of India

SBI, the largest public sector lender in the country, has also been picked by HDFC Securities. “Unlike other PSU banks, SBI has not lost share in loans or low-cost deposits over past decade. SBI’s large and granular deposit base is backed by low-cost CASA and this gives it access to low-cost funds which is its biggest competitive advantage,” the report said. Risks include macroeconomic pitfalls, given SBI’s size and exposure and increasing geographic penetration by newer private sector banks. The lender’s stock is down 2.7% year-to-date, trading at Rs 458 apiece.

ITC

Cigarettes to hospitality major ITC has a strong 4.1% dividend yield. “The Russia-Ukraine war has resulted in sharp inflation in wheat prices as both countries account for ~25% of the global wheat supplies. Soaring wheat prices and volume growth will benefit ITC,” HDFC Securities said. “At 17.7x FY24 EPS, ITC trades at a steep discount to the FMCG sector. Besides, its ~5% dividend yield and dividend payout ratio of 80-85% vs. ~67% earlier resolves concern over poor capital allocation,” they added. ITC stock has zoomed 17% in 2022, sitting above Rs 257 per share.

ONGC

State-owned Oil & Natural Gas Corporation Ltd. (ONGC) is India’s largest oil and gas producer with a share of nearly 73% in India’s total production of crude oil and ~79% of natural gas. ONGC also runs a subsidiary ONGC videsh. “Any value unlocking from subsidiaries and other investments & lower holding company discount on investments can be positive for the stock. The company also has excellent financial flexibility arising from its moderate gearing, large liquid investments, its significant sovereign ownership and strategic importance,” HDFC Securities said. The stock is up 8% so far in 2022, trading at Rs 154.5 per share. 

Bharti Airtel

The telecom giant is not just a major force in India’s telco landscape but also in Africa. With tariff hikes started by the industry, the average revenue per user for the telcos in India is expected to rise. “Bharti Airtel enjoys industry-leading ARPU of Rs 163 with 40% gain in two years and the company expects another tariff hike in 2022, if not in the next three to four months, but later in the current calendar year itself. The company also expects to see ARPU at Rs 200,” HDFC Securities said. Airtel share price is flat with marginal gains so far this year and now trades at Rs 695 per share.

Other stocks picked by HDFC Securities include Aegis Logistics, CDSL, HPCL, Thermax, and TVS Motor Company.

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