Six high-conviction large-cap buy picks as Sensex, Nifty continue to march northward in August

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September 07, 2020 3:22 PM

Indian share markets continued to map an upward trajectory in August with BSE Sensex and Nifty 50 rising nearly 3 per cent from the end of July

State Bank of India, SBI, BPCL, UPLResearch and brokerage firm Emkay Global Financial Services has prepared a list of high conviction large-cap stocks with an ‘overweight’ rating

Indian share markets continued to map an upward trajectory in August with BSE Sensex and Nifty 50 rising nearly 3 per cent from the end of July. Research and brokerage firm Emkay Global Financial Services has prepared a list of high conviction large-cap stocks with an ‘overweight’ rating ranging from industry leaders in banking to automobile companies. The firm has included stocks such as Hero Motocorp, State Bank of India, Bharat Petroleum Corporation Ltd and United Breweries, and removed Aurobindo Pharma, Bharti Airtel, Britannia, HDFC Bank and Infosys. In the current volatile scenario, these stocks could offer good returns in the coming days.

BPCL: Despite 25-30 per cent volume hit from coronavirus pandemic, BPCL has reported a strong set of numbers in the first quarter of current fiscal on strong marketing margins. The brokerage firm believes that marketing margins were not high in the first quarter but would still remain healthy, driving marketing profitability. The report noted that as the world economy is recovering from Covid-19 and petroleum demand is returning, GRMs are expected to increase substantially. Emkay also said in its report that the strategic disinvestment process is on and as private and global interests emerge, the stock could see further rerating.

Hero MotoCorp: Hero MotoCorp is a key beneficiary of domestic two-wheeler upcycle. The research and brokerage firm believes that strong rural presence with a wide distribution network may aid market share gains in the near term for Hero MotoCorp. The auto major has a strong presence and a higher market share in rural states. In its report, the brokerage firm also added that Hero MotoCorp continues with its market dominance in the motorcycles segment. It has been able to defend market share due to its strong brand equity, solid product portfolio and extensive distribution network,” it said.

NTPC: Maintaining a ‘buy’ rating to the stock, the brokerage firm believes that NTPC’s plant availability factor has been on an improving trend since FY18 and reached 89.7 per cent in FY20 as compared to 85.7 per cent in FY19 and 86 per cent in FY18. “We continue to maintain our ‘buy’ rating on NTPC as it continues to operate under a risk-averse regulatory business model where returns are fixed based on plant availability,” it said.

SBI: State Bank of India has one of the lowest GNPA ratios among PSBs at 5.4 per cent, while “we believe the bank could be a significant beneficiary of any re-acceleration in corporate resolutions,” the brokerage firm said. It further highlighted that the impact of Covid-19 on SBI’s corporate portfolio will be fairly limited, while lower vulnerable retail portfolio coupled with restructuring window should contain the asset-quality impact. Emkay likes SBI for its enviable liability profile, higher retail orientation and reasonable capital position.

United Breweries: United Breweries offers a strong long-term growth opportunity in beer and is best-placed to emerge stronger post the crisis and gain from a weaker competition, says Emkay Global Financial Services. The brokerage firm believes that increasing normalcy and re-opening of the on-premise channel should help the category bounce back strongly in the coming quarters. “Tax reversals in Delhi/Odisha/J&K are positive and further tax reversals, particularly in Telangana/WB/Rajasthan/AP, could drive upsides to volume growth forecasts.

UPL: The brokerage firm highlighted that UPL indicated benefitting from the US-China trade war in the US as customers are looking to diversify to non-Chinese suppliers and higher corn purchases by China from Brazil. “We believe that UPL is on the path to re-rate from its 5-yr low valuations toward its 5-yr mean valuations due to continued market share gains, margin improvement on the back of synergies and reduction in adjusted net debt/EBITDA,” it noted in a report.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

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