ETMarkets Diwali Survey: D-Street’s sectoral choices for Samvat 2077 have a cyclical bias
About a dozen brokerages, who took part in the Diwali survey of ETMarkets.com, said while the ongoing themes such as digitisation may continue to play out next Samvat too, cyclicals such as consumer durables and economy-related stocks could make a...
Narendra Solanki of Anand Rathi Shares & Stock Brokers finds comfort in the ongoing theme of the shift in global supply chain out of China into comparatively stable emerging markets like India.
NEW DELHI: Pharma and IT emerged top investment themes of Samvat 2076, thanks to the Covid-led disruptions and the resultant demand for healthcare and infrastructure for work-from-home setup.
Can Hindu Calendar 2077 be any different?
About a dozen brokerages, who took part in the Diwali survey of ETMarkets.com, said while the ongoing themes such as digitisation may continue to play out next Samvat too, cyclicals such as consumer durables and economy-related stocks could make a strong comeback and would be worth a look.
Nirav Sheth, Chief Executive Officer of Emkay Institutional Equities, expects a renaissance in manufacturing.
This, he said, will get reflected across multiple sectors such as consumer discretionary, chemicals and pharmaceuticals. The key to playing this theme would be to look for companies that can build a strong export model alongside a strong domestic base.
Sheth expects real estate stocks to make a comeback, as he sees demand recovery to gain momentum after several years of slowdown. "Well-governed real estate names, building materials and even NBFCs with good underwriting skills will benefit from a vibrant environment in real estate. Digitisation across sectors is likely to accelerate. Retail, media and financial services will benefit if the companies are quick to embrace change and invest in them,” Sheth said.
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Data showed the BSE Healthcare Index topped the sectoral charts for last Samvat by rallying 51 per cent since last Diwali. The BSE IT and the BSE TECk (that also includes telecom stocks) indices rose 50 per cent and 42 per cent, respectively. The BSE FMCG index fell 6 per cent and the BSE Realty index 11 per cent, ending up as worst performers.
Rusmik Oza of Kotak Securities said the ideal investment theme for next one year would be economy-driven sectors to play the economic recovery.
"Last one year belonged to the defensive sectors such as FMCG, IT services and pharma. As we move towards getting a vaccine by middle of next year and the economy gets back to normal, we can expect the economy-driven sectors to outperform the defensives in Samvat 2077. Banks, NBFCs, automobiles, oil & gas, telecom, utilities, capital goods, cement and metals could come into focus next year. The potential upside in most of these sectors based on our one-year price targets ranges 20-39 per cent against single-digit potential upside for Nifty50,” Oza said.
He said most economy-driven sectors are prone to market corrections and one should accumulate stocks rather than invest in them at one go.
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"Within cyclical sectors, we are positive on cement and low ticket consumer durables as demand has rebound at a much faster rate and is expected to remain strong. We also expect sectors with revenue visibility such as agrochemicals, chemicals, two-wheelers and tractors along with IT and pharma will continue to do well given the strong demand dynamics," said Jyoti Roy of Angel Broking.
Narendra Solanki of Anand Rathi Shares & Stock Brokers finds comfort in the ongoing theme of the shift in global supply chain out of China into comparatively stable emerging markets like India.
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Bet on the rise in India’s share in manufacturing exports, in IT and Technology, in pharma API and specialty chemicals. Some improvement in banks and financials is likely by around June quarter of 2021, he said.
Solanki advised investors to stay with the leaders in the financial sector, and remains largely stock-specific in the case of other sectors.
Deepak Jasani of HDFC Securities prefers companies with consistent growth, efficient cost structures and good capital allocation policies.
G Chokkalingam, Founder of Equinomics, expects the broader market to fare well in the coming Samvat. He said midcap and smallcaps pockets are still down 21 per cent since January 2018 and just 6 per cent listed stocks have outperformed the broader market indices in last 3 years.
"These 6 per cent of listed stocks account for 90 per cent of overall BSE market-cap. This structural change might reverse in 2021,” he said. Initial signs suggest the changes are already in the offing. The BSE Smallcap Index has gained 15 per cent since last Diwali compared with an 8.5 per cent rise in the BSE Sensex during the same period. The BSE Midcap index has risen 7.7 per cent during this period.
Top Diwali stock picks from 6 brokerages for Samvat 2077
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From extreme pessimism in March 2020, the stock market recovery has been incredible as it inches closer to the previous lifetime high. BSE Sensex is less than 400 points away from its record high of 42,273 scaled on January 20 . Notwithstanding the uncertainty on many economic fronts, analysts believe the worst is over for the capital markets. AK Prabhakar, Head of Research at IDBI Capital Markets, says Sensex can hit 45,000 by next Diwali and investors should give 70 per cent exposure to equities at this point with 20 per cent to bonds and 10 per cent to gold. Analyst says Vikram Samvat 2077 could well be akin to Calendar 2003 from a market standpoint. The 30-share Sensex had jumped five times between July 2003 and December 2008. To make your portfolio future‐ready, here is a list of 50 stocks that six brokerages have picked as their Diwali bets.
From extreme pessimism in March 2020, the stock market recovery has been incredible as it inches closer to the previous lifetime high. BSE Sensex is less than 400 points away from its record high of ..
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IIFL Securities says ICICI Bank is well placed in the current scenario to gain market share across loans, deposits and revenues on the back of its funding position and product offerings. IIFL Securities expects loan growth of 12 CAGR over FY 20-23 E aided by higher growth in the retail loans. Gradual run down of excess liquidity and an increase in retail loan mix would aid NIMs going forward.
IIFL Securities says ICICI Bank is well placed in the current scenario to gain market share across loans, deposits and revenues on the back of its funding position and product offerings. IIFL Securit..
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IIFL Securities says HCL’s portfolio is relatively insulated against peers as it has the lower concentration to verticals like travel, energy, hospitality and higher exposure to low impact verticals like BFSI healthcare and technology Moreover, it has 37 exposure to IMS (resilient service line) where it has strong partnerships and capabilities that can enable it to capitalise on opportunities in areas of cloud migration and network security.
IIFL Securities says HCL’s portfolio is relatively insulated against peers as it has the lower concentration to verticals like travel, energy, hospitality and higher exposure to low impact verticals ..
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IIFL Securities says this company can drive improved growth in the acquired Wockhardt India portfolio through investments in branding and expanding doctor reach, while the company’s API business would benefit from structural tailwinds owing to de-risking of China-linked manufacturing supply chains.
IIFL Securities says this company can drive improved growth in the acquired Wockhardt India portfolio through investments in branding and expanding doctor reach, while the company’s API business woul..
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IIFL Securities says this company has taken a conscious call to lower dependence on the auto sector and made tremendous progress over the past four years in the non-auto business. The outlook is strong for rail section supplies for coachbuilding. The large diameter tubes segment, driven by import substitution, should see healthy growth as demand revives in FY 22-23E.
IIFL Securities says this company has taken a conscious call to lower dependence on the auto sector and made tremendous progress over the past four years in the non-auto business. The outlook is stro..
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Led by a restructured sales force and driven senior management, IIFL Securities believes that Persistent could witness double-digit revenue CAGR over the next three years. The BFSI vertical and its Salesforce practice are likely to be key revenue drivers for Persistent.
Led by a restructured sales force and driven senior management, IIFL Securities believes that Persistent could witness double-digit revenue CAGR over the next three years. The BFSI vertical and its S..
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The company has been outperforming the Indian pharma market and IIFL Securities expects this outperformance to sustain on account of new launches and strong growth in focused products group (especially cardiac), which consist of cardiac brands Cilacar and Nicardia and acute brands Rantac and Metrogyl.
The company has been outperforming the Indian pharma market and IIFL Securities expects this outperformance to sustain on account of new launches and strong growth in focused products group (especial..
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Apart from India, SIS has strong positioning in developed markets like Australia (leadership position), New Zealand and Singapore The growth momentum is quite strong in these regions, particularly in Australia, where ad hoc contracts are driving growth and are offsetting pricing pressure Moreover, the overall security services business has high ROCE and generates strong cash flow, thus providing opportunities to invest in its incubation portfolios, says IIFL Securities.
Apart from India, SIS has strong positioning in developed markets like Australia (leadership position), New Zealand and Singapore The growth momentum is quite strong in these regions, particularly in..
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Reliance Securities say ALL's market share in the medium and heavy commercial vehicles (M&HCV) segment continues to remain more or less stable over the years. Therefore, it doesn’t have a higher risk of any new launch by the competitor taking away big chunk of shares, unlike passenger vehicles. Moreover, pricing discipline is broadly maintained unlike aggressive pricing by the two-wheelers players. Thus, the competitive pressure for the M&HCV industry is the least, in our view. Ashok Leyland has strategised its light commercial vehicles business to gain market share with new products and segments.
Reliance Securities say ALL's market share in the medium and heavy commercial vehicles (M&HCV) segment continues to remain more or less stable over the years. Therefore, it doesn’t have a higher risk..
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Reliance Securities says a strong rebound in automobile business post a major slump and strong double-digit growth in high-margin engineering business will be the biggest triggers for Bharat Forge’s earnings and valuation re-rating close to engineering conglomerates, going forward. Its standalone and consolidated margin is expected to improve by 420 basis points and 510 basis points over FY20-23E, respectively.
Reliance Securities says a strong rebound in automobile business post a major slump and strong double-digit growth in high-margin engineering business will be the biggest triggers for Bharat Forge’s ..
For Vinod Nair of Geojit Financial Services, IT, pharma, chemicals and banking stocks are key themes for next year.
Ravi Singh, Vice-President and Head of Research at Karvy Stock Broking, said banking, pharma, FMCG and IT have recovered sharply, but cyclical and worst-hit sectors such as metals, NBFCs, building materials, hospitality, outdoor entertainment and aviation are yet to recover.
"It would be apt for investors to look for quality names in the beaten down and out-of-favor sectors and watch out for the theme to play out. We are nearing a medical breakthrough on Covid, and the world is awash with liquidity, and smart money will find way into these out-of-favour sectors," he said.
Gaurav Garg of CapitalVia prefers retail and FMCG.
AK Prabhakar of IDBI Capital likes the consumption play. He said he would like to play consumer durable stocks such as Crompton Greaves, Havells, Voltas and Johnson Controls and also FMCG stocks such as Nestle, HUL and Dabur India.
