Stock Market

Diwali rocket stocks: 10 large caps to buy in Samvat 2073



Chillicious Bureau

The new year Samvat 2073 is likely to see good growth as analysts are bullish on the market. Motilal Oswal says strong pick-up in earnings and return to double digit growth in revenue is crucial for the market to move up on a sustainable basis. The brokerage firm is betting on Indian market and expects Sensex earnings per share (EPS) to grow at 17 percent CAGR over FY16-18 as compared to 6 percent CAGR witnessed during FY08-16.


ICICI Direct sees Sensex EPS to grow 16.4 percent YoY to Rs 1600 in FY17 and then witness growth of 17.5 percent YoY in FY18 to Rs 1880. It has set a one year forward target of 31000 for the Sensex and 9400 for the Nifty.


Reliance Securities believes that large caps will outperform from current levels because the valuation gap between Nifty and Small Cap Indices are at all time high.


So, as Diwali glitters shine on Dalal Street here are stocks that you can bet on


HDFC Bank


Motilal Oswal has set a target of Rs 1500 per share, indicating 18 percent upside.  It says strong fundamentals and near-nil stress
loans would enable the bank to gain market share. Further, continued strong investment in people and branches indicating management positive
outlook on business. Return on equity (RoEs) are expected to be the best amongst private banks at 20 percent.


LIC Housing Finance


Motilal Oswal thinks the stock can give 24 percent upside at Rs 600 per share. It feels the NBCC company will  be the biggest beneficiary of falling GSec yields as more than 80 percent of borrowings come from capital markets. Since the RBI started open market operations 10 months back, GSec yields have declined more than 100 basis points from 7.8 percent to 6.7 percent.


Tech Mahindra


ICICIDirect.com prefers Tech Mahindra due to its lesser exposure in Banking, Financial services and Insurance (BFSI) which is currently facing  macro headwinds. Currently BFSI vertical contributes only 11 percent to revenue versus 35-40 percent among other IT peers.


Kotak Mahindra Bank


HDFC Securities is betting on it with target at Rs 854 per share. It says with the e-VYSB integration nearing completion (costs and management bandwidth), and a gradual uptick in  macros, it foresees core improvement led by loan growth, improving operating leverage and LLP reverting to normalised levels.


Ashok Leyland


Geojit BNP Paribas sees 32 percent upside in the stock. It expects valuation to improve ahead due to better earnings outlook in the second half of FY17. It has set a target price of Rs 116 per share.


Hero MotoCorp


Geojit BNP Paribas expects the stock to maintain leadership position with a domestic market share of 40 percent in FY18 on capacity expansion and new launches.


Aurobindo Pharma


Reliance Securities expects the pharma stock to deliver a 19-20 percent CAGR in PAT over FY 16-18 It says reduction in capex would result in strong free cash flow generation. It forecasts return on equity (RoE) and RoCE at 24 percent and 26 percent respectively by FY18. It has a target price of Rs 981.


L&T


Centrum Wealth believes L&T is one of the best positioned companies to capitalise on investments and reforms in the infrastructure sector. The company aims to achieve revenue of Rs 2 lakh crore and order inflow in excess of Rs 2.5 lakh crore per annum by 2021, without compromising on margins.


Sun Pharma


Centrum is betting on Sun Pharma as it finds the company to be best placed to navigate the slowdown in the US generic business. However, it says key risks are lower revenues from US Markets, delay in resolution of USFDA warning letter for Halol plant and regulatory risk for its manufacturing facilities catering to global market.


M&M


Kotak Securities sees 16.1 percent upside in the stock. It says profit margin for M&M’s auto segment is likely to stay subdued. However, tractor business is expected to witness strong margins due to
healthy demand recovery. Overall, increased share of tractor revenues will be positive for overall EBITDA margins.