Stocks, market themes you may consider in year 2021

NEW DELHI: As the countdown for the dawn of Calendar 2021 begins, a host of brokerages have come out with their investment strategies to make most of the ongoing bull run in the New Year.

Analysts largely project Calendar 2021 to be a year of second-rung stocks. They expect industrial sectors to make a comeback and find select PSUs, realty and metals stocks attractive. Some feel banking, IT and pharma stocks may continue to find favour among investors.

HDFC Securities says a large part of the run-up in Nifty50 is over, its rise would be gradual and measured from now on. The broking firm believes the market will continue to broaden and favour smallcaps and value stocks, as vaccines start rolling out over the next six months.


“Growth-hungry midcaps flourish in low-interest-rate regimes. Data shows a high correlation between the repo rate and the ratio between the Midcap index and Nifty50, again suggesting the likelihood of midcaps’ outperformance over Nifty in the coming year if interest rates continue to remain low,” the brokerage said.

Here is a list of 10 stocks HDFC Securities is recommending:-

Axis Securities has a December 2021 Nifty target 14,600, valuing the index at 20 times FY23 earnings of Rs 730. It said Nifty50 has delivered 23 per cent return since December 2017. Out of that, the top 10 stocks by free float market-cap delivered 43 per cent return against a flat return by the remaining 40 stocks.

Based on the performance of the Top 10 stocks, the adjusted Nifty50 value works out to 15,030, while its current value stands at 10,522, if considered the rest 40 stocks.

“This indicates Nifty50 is better valued beyond top 10 names. Thus, the long-term risk rewards are better in the next 40 names,” it said, adding that growth combined with value is a win-win proposition, it said.

“Value plays like metals, banks, NBFCs and others have started delivering solid returns. Also smallcaps and midcaps from the discretionary consumption, retail, autos and other segments have delivered good returns. Thus, the market is rewarding various themes handsomely. Hence, a combination of the two themes continues to deliver the biggest rewards," it said.

This is what Axis Securities prefers in terms of stocks and themes.

Santosh Kumar Singh, Head of Research at Motilal Oswal Asset Management Company, meanwhile, expects real estate firms, life insurers and lenders to outperform in 2021.

“For lenders, the non-performing loans (NPLs) are behind us and the Covid impact has been lesser than expected. This space is expected to show one of the fastest rates of profit growth in multiple years, with corporate banks being the key contributors,” he said.

Life insurance, he said, is a structural play, given the under-penetration and emergence of new segments. “Demand for insurance has increased in the Covid environment and the sector may see much faster growth in 2021 as the economy opens up and gets into a much better base,” Singh said.

“Real estate is one sector that has been under stress for the best part of the last decade. We have seen massive consolidation in the residential real estate market. With low interest rates, high liquidity, flat property prices for almost six years, better regulations and better quality corporates, this sector seems primed for a revival,” he said.

As for themes, Singh prefers digitisation and capital expenditure.