Morgan Stanley believes domestic benchmark BSE Sensex may regain its life-time high of 30,000-mark in a best case scenario by March 2017.
After the bull-run in equity markets last week, there are more reasons to rejoice for investors on Dalal Street. Global brokerage firm Morgan Stanley believes domestic benchmark BSE Sensex may regain its life-time high of 30,000-mark in a best case scenario by March 2017. The 30-share index hit its intraday all-time of 30024.74 on March 4, 2015.
According to Morgan Stanley, earning upgrades, passage of GST Bill later this year and further rate cuts by the Reserve Bank of India will aid Indian equities to outpace the global markets. The brokerage is bullish on consumer discretionary stocks and believes the segment will do well over the next 12-18 months.
“Discretionary consumption spending is likely to rise which makes us constructive on retail banks and consumer discretionary including auto,” Morgan Stanley India Equity Research Head Ridham Desai told reporters in Mumbai.
The macroeconomic data further supports Desai expectation. Indian economy grew by 7.9 per cent in March quarter to consolidate its position as the fastest growing major economy, leaving behind China, with a five-year high growth rate of 7.6 per cent for 2015-16 on robust manufacturing growth. The growth was 7.2 per cent in 2014-15.
The production of eight core sectors grew by 8.5 per cent in April on the back of pick up in output of refinery products, fertilisers, steel, cement and electricity. The core sector’s growth was at 6.4 per cent in previous month, signalling a recovery in infrastructure segments.
However, brokerage Bank of America- Merrill Lynch (BoA-ML) is looking cautious on India’s capex recovery. It said, “We expect capex recovery now only in 2017, once lending rates come off further as businesses will take up investment projects only when lower rates revive demand and existing capacity gets exhausted.” In the base case scenario, Ridham Desai sees Sensex touching 27,500 by March 2017.
Domestic market analysts are also looking bullish on Indian equity markets. G Chokkalingam, founder, Equinomics Research & Advisory sees Sensex nears 30,000 by December-end in the best case scenario. The BSE Sensex was at 26,714 on June 1.
In this scenario when both global and domestic market experts are looking bullish on Indian equity markets. We collate 5 stocks which can give you lucrative returns from here onwards.
Recommended By : Jefferies
Why Buy: Revenue growth improved in FY16 on strong sales execution and large deal wins. Acquisitions – Panaya, Skava/Kallidus and Noah would have contributed to around 100bps growth. Growth was led by North America by geos and Life Sciences by verticals. Our 12-M target price of Rs 1,390 is based on 18x P/E applied to FY18e EPS, at a premium to peers. Maintain Buy. Infosys remain our top sector pick with valuation premium being well justified by industry leading growth in FY17e.
Recommended By: Karvy Stock Broking
Why Buy: Tata Motors posted three-fold rise in its consolidated net profit at Rs 5,177.06 crore for the fourth quarter ended March 31, driven by strong performance of its British arm JLR and robust volume growth of its heavy and medium commercial vehicles. Karvy Stock Broking in a research report said, “Tata Motors’ Q4FY16 performance was way above our as well as street’s estimates.
In view of JLR healthy volumes and margins, we increase our estimates for FY17E/FY18E. On SOTP basis, we increase our target price from Rs 450 to Rs 550, valuing its standalone business at Rs 106, JLR at Rs 519 and other subsidiaries at Rs 52 based on
FY18E EBITDA, post excluding net debt of Rs 127 per share.”
State Bank of India
Recommended By: Sharekhan
Why Buy: Amidst weak performances of PSU banks, the operating metrics of State Bank of India (SBI) stood relatively better. Net interest income (NII) growth stood at 3.9 per cent yoy (higher than expected) owing to slower growth in interest income due to interest reversals of Rs 871 crore on account of higher slippages. The non-interest income increased by 25.6 per cent yoy owing to a healthy 18.2 per cent yoy increase in fee income and 44.5 per cent growth in recovery from written-off accounts. This resulted in an operating profit growth of 14.4 per cent (above expectation). However, the net profit declined by 66.2 per cent yoy due to 99.8 per cent rise in provisions. Net interest margin during the quarter improved by 3BPS QoQ while CASA ratio increased by 114 basis points qoq to 43.84 per cent. Though, Sharekhan remains cautious on PSBs but SBI has shown a relatively better performance in spite of its larger size. the brokerage house is looking bullish on SBI with target price of Rs 251.
Recommended By: Sharekhan
Why Buy: Drug maker Aurobindo Pharma on May 30 posted a consolidated net profit at Rs 562.85 crore for the fourth quarter ended March 31. The company had posted a net profit of Rs 403.8 crore in the January-March period of the previous fiscal. The management has indicated the launch of 25-28 products (more approval of complex products) in the coming years which will help the company to achieve higher growth and will also improve its margins from FY2017 onwards. Going forward, the company is likely to see better traction on the operating profit margins front as the newly acquired entities will show better profitability (Actavis business saw a turnaround in FY2016) and more approvals of high-margin products from the USFDA. The US (44 per cent of the total revenue) business will continue to remain a key growth driver for the company. Sharkhan has revised earnings estimates for Aurobindo Pharma upwards for FY2017 and FY2018 by 4 per cent and 8 per cent, respectively. “We see consistent strong traction in the base business of the USA and better profitability on account of niche products to be launched in coming time. Consequently, we have revised our price target upward to Rs 885,” Sharekhan said in a research report.
Bajaj Auto: Bajaj Auto on May 25 reported 29.18 per cent increase in standalone net profit to Rs 803.06 crore for the fourth quarter ended March 31, riding on robust sales growth. The company had posted a standalone net profit of Rs 621.62 crore in the same period of the previous fiscal. According to Religare Institutional Research, Bajaj Auto’s Q4FY16 numbers were largely in line with estimates. Soft commodity prices aided EBITDA margin gains of 356 basis points yoy to 21.3 per cent. The brokerage house believes the share price can touch Rs 2570 by March 2017. “With new models likely to support higher domestic sales for the company and exports bottoming out, we expect volume growth momentum to continue for the next two years alongside steady margins,” Religare added.
With agency inputs