Domestic stock markets closed the previous week with gains of 750 points, regaining 28,000 level and Nifty reclaiming the 8,800 mark on the back of Reserve Bank of India’s report on Indian economy that country’s growth outlook remained ‘brighter’ and that the economy may grow 7.6 per cent this year on account of better monsoon and boost demand in the wake of 7th Pay Commission implementation.
During the week gone by, Sensex opened higher at 27,827.26 and hovered in a range of 28,581.58 and 27,698.71 before ending at 28,532.11, showing robust gain of 749.86 points, or 2.70 per cent. The broader Nifty also jumped 237.10 points, or 2.77 per cent, to 8,809.65 after moving between a high of 8,824.10 and a low of 8,543.75. Both Sensex and Nifty hit their fresh 52-week high in the week gone by.
This week, stock markets would be driven by the monthly data announcement of the country’s services sector, global trends and quarterly numbers of blue-chip companies like ONGC, Gail and Coal India in a holiday-truncated week. Stock market will eye new RBI Governor Urjit Patel, who assumed office on September 4.
Market experts like Prakash Diwan of prakashdiwan.in and Pankaj Pandey of ICICI Securities are bullish on the further movement of Indian equity markets and believe that Nifty can touch 9,500 by December-end on account of earning upgrades going forward and rising consumption demand.
With the help of brokerage houses we identify 5 stocks to bet on:
The company’s June quarter results were largely in line with estimates, according to Religare Securities. The company’s revenue grew by 10 per cent year on year (YoY) to Rs 90.2 cr. For the quarter ended June 30, 2016, the company reported a net sales of Rs 87.99 crore, up 8.18 per cent, against Rs 81.33 crore in the corresponding quarter a year ago. Consolidated net profit of the company grew by 40.81 per cent year-on-year to Rs 23.51 crore for the quarter under review. Religare believes that while the company’s extant facilities would continue to deliver, the volume will also gain momentum from the new Vapi ICD albeit gradually. Navkar Corporation is well-placed to capture the expected increase in EXIM trade due to multiple business-friendly initiatives taken by the government. Further, the brokerage house believes that threat of new entrants in CFS and ICD industry is moderate due to limited land availability and that too at high prices at strategic locations in the vicinity of ports, discourage the peers.
The brokerage House has reiterated its ‘Buy’ recommendation on the stock with a target price of Rs Rs 248.
Bharat Petroleum Corporation Ltd (BPCL)
The oil market company (OMC) reported better-than-expected EBITDA of Rs 3,900 cr. Benefit from product inventory gains of Rs 1,280 crore was partly negated by forex loss of Rs 170 crore, marginally lower-than-expected GRM of $6.1 per barrel and higher-than-expected opex. Brokerage house Motilal Oswal said that ongoing reforms have the potential to transform OMCs into a structural investment play led by higher earnings predictability and increase in profitability leading to higher return on equity(RoE)’s. While maintaining a ‘Buy’ rating on the stock, the brokerage house said that BPCL stands out among OMCs for its superior RoE.
Mahanagar Gas (MGL)
Prabhudas Lilladher has maintained a ‘Buy’ rating on the stock with target price of Rs 654. According to the brokerage house, the company’s first quarter results beat estimates by reporting Q1FY17 EBITDA and net profit of Rs 150 crore and Rs 92.7 crores, respectively. MGL’s gas sales momentum has picked‐up as improved fuel economics post recent gas price cut has helped improve CNG demand from private vehicles and taxis. Also, government push for PNG domestic connections has improved volumes; Q1 overall sales volume was up 7.5 per cent YoY v/s FY16 at 1.7 per cent. Tailwinds of cheaper domestic gas, along with favourable fuel economics, will drive earnings for the company; the brokerage house factors in 16.2 per cent CAGR earnings over FY16‐18E.
Higher vehicle conversion (private taxis and discretionary demand), will help drive CNG volumes.
Indian Oil Corporation
Indian Oil Corporation’s (IOCL) first quarterly results stood above market estimates, which showed the company’s EBITDA rising 35 per cent year-on-year (YoY) to Rs 13,300 crore led by product inventory gains of Rs 2,400 crore and higher GRM of $10 per bbl and higher petchem EBITDA of Rs 2,000 crores. PAT of Rs 8,300 crores that benefited from lower depreciation and marginally lower tax rate. Auto fuel deregulation is transforming OMCs into a structural investment play led by higher earnings predictability and increase in profitability leading to higher RoE’s. Motilal Oswal has maintained ‘Buy’ rating on IOC with target price of Rs 740.
Zee Entertainment buzzed the markets recently with its board approving the sale of its sports business to Sony Pictures Networks for an all-cash consideration of $385 million (approximately Rs 2578 cr). Brokerage houses see it as a positive move for the company as the business was a loss-making one. Religare Institutional Research said, “The sale is positive as the sports business is loss making and it will boost margins and expand return on equity (ROEs) to mid-to-high 20s (assuming a bulk of proceeds is returned to shareholders). While there will be some reinvestments from this inflow, the brokerage house does expect Zee to return large part of the cash.
Zee’s sport business has been incurring losses for the past few years now and management had guided for a Rs 1oo crore EBITDA loss in FY17.
Religare has a ‘Buy’ rating on the stock with a target price of Rs 550 (Rs 510 earlier).