Indian equity markets have been highly volatile over the last few weeks amid rising inflation concerns, Ukraine conflict, central bank rate hikes and elevated crude oil prices. The relentless selling by foreign investors has added to the pressure as the rupee continues to see new lows. Axis Securities continues to hold a positive long-term outlook on the market, supported by a favourable structure emerging as increasing Capex spending is enabling banks to improve credit growth. “Moreover, the overall expenditure boost in the Union Budget 2022-23 will help deliver a broad-based growth in FY23,” it said. The brokerage firm expects NSE Nifty 50 to hit 18,400 in March 2023.
“The market is currently eyeing the central banks’ guidance on the interest rates trajectory. The RBI’s MPC meeting and the policy action will decide the direction of the market over the near term,” it said. Analysts at Axis Securities upgraded auto sector to ‘Overweight’ from the earlier ‘Equal-weight’ stance. Meanwhile it has downgraded IT, Metal sector to Equal-weight from Overweight earlier. The brokerage has come up with seven largecap stocks for the month of June which it expects to offer up to 34 per cent upside over the next 12 months. It also made certain changes to its top picks like removing Nalco, Krishna Institute, and Equitas Small Finance bank while adding Astral Ltd, APL Apollo Tubes, and Healthcare Global Ent.
Top largecap stocks picks to sail through market volatility
Target price: Rs 1,000; Potential upside: 34%
The bank has been outperforming its peers and has been ticking most boxes on growth, margins and asset quality, Axis Securities said. Higher loan growth, improving operating profits, and a strong provision buffer coupled with a strong deposit in the franchise will help the bank achieve return on assets (ROA) expansion over FY 23-24, Axis Securities said.
Target price : Rs 4,350; Potential upside: 18%
According to the Axis Securities report, Bajaj Auto is well-placed to capitalise on demand normalisation and premiumisation trends in the two-wheeler industry, which should support profitability and operational performance going forward. The brokerage expects the company to gain further market share in exports, driven by its market leadership position, brand equity, and enhanced distribution network. Bajaj Auto is the brokerage’s preferred pick in the two-wheeler segment, given reasonable valuations and strong medium-term growth prospects.
Target price: Rs 1,700; Potential upside: 48%
Tech Mahindra has acquired Brainscale Inc for a consideration of $28.8 million including earnouts. The acquisition will bolster Tech Mahindra’s consulting capabilities in the cloud transformation space and will enable growth of cloud-related IT services in the North American market, said Axis Securities. Tech Mahindra has a superior services mix and multiple long-term contracts that are well-spread across verticals, reducing its dependency on any one vertical. Furthermore, it foresees healthy tractions in communications and enterprise verticals which will greatly accelerate the company’s revenue growth moving forward, it added.
Target price: Rs 9,800; Potential upside: 27%
Analysts at Axis Securities believe that Maruti Suzuki could emerge as the biggest beneficiary of demand recovery in the post-Covid period, considering its stronghold in the entry-level segment and a favorable product lifecycle. New launches, targeted at filling the gaps in its portfolio, are likely to improve the overall product mix, it said.The car maker would gain further market share, driven by an expected shift towards petrol & CNG vehicles, it said, adding that new product launches may resume with a mix of product upgrades and new model launches. “We expect the company volumes to witness a strong growth CAGR of 16 per cent over FY22- 24,” the brokerage said.
State Bank of India
Target: Rs 665; Potential upside: 43%
Among PSU banks, SBI remains the best play on the gradual recovery of the Indian economy on account of its healthy PCR, robust capitalisation, a strong liability franchise, and an improved asset quality outlook. Axis Securities said normalisation in credit costs and improved growth outlook should lead to double-digit return on equities (ROEs) of 14-15 per cent over FY23-24. “The bank’s asset quality performance has been consistently ahead of expectations including eventually stressed asset accruals which resulted in credit cost normalization. We believe SBI unsecured lending profile is strong with over 90 per cent belonging to the salaried government employees. Retail book traction remained healthy at 15%, supported by home loans and Xpress credit cards and we expect further improvement in the coming quarters,” the brokerage said.
Target price: Rs 900; Potential upside: 31%
The company’s business fundamentals remain strong and continue to improve. The management foresees significant revenue and profit growth potential, supported by expanding distribution in rural areas, investment in the network, and increasing 4G coverage. Further strategic investment opportunities are available in tower sales, minority, and IPO investments in mobile money, among others.
Target price: Rs 1,125; Potential upside: 17%
In the consumer healthcare business (CHL), India accounts for 60 per cent of the company’s consumer wellness portfolio sales and South Africa (SA) accounts for the balance 40 per cent. This business, Axis Securities said, has reached 8 per cent of the overall sales from 6 per cent in the last year. It has reached the size of Rs 1,800 crore and EBITDA breakeven is expected at the end of FY22.
“The buildout of the respiratory portfolio would drive strong operating leverage in the US business which along with a sustained high single-digit growth in the India business and further cost optimisation would expand the company’s RoIC by 200 bps to 18 per cent over FY21-FY24,” it said.
Meanwhile, the brokerage picked Federal Bank, Varun Beverages, Ashok Leyland, Astral, Bata India, APL Apollo Tubes as top midcap bets, and Healthcare Global Enterprises, Praj Industries and CCL Products as smallcap bets.
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