Nov 11 2012 , Mumbai
Most brokerages are bullish in their outlook for equity market in the new Samvat, but their top picks are mostly confined to large-caps
The Diwali day heralds a new Samvat, the traditional new financial year for accounting purposes. For stock investors, the year begins with the customary muhurat trading, preceded by the worshipping of Lakshmi, the goddess of wealth and prosperity.
Brokerages have come out with stock picks for the new Samvat, based on valuations and future potential. Kotak Securities’ Diwali picks include Cairn India, ICICI Bank, Grasim Industries, Tata Consultancy Services, Adani Port and SEZ, Engineers India and KPIT Cummins.
Dipen Shah, head of private client group research at Kotak Securities, said, “We are hopeful of much better times in Samvat 2069. Given this backdrop, we have selected these stocks, which look attractive from an investment perspective.”
“The new Samvat brings with it hope for a better future. The US elections have ensured continuity and minimal disruption in US economic policies. The easy monetary policy also looks all set to continue,” Shah said.
Pankaj Pandey, head of research at ICICIdirect, said: “We expect earnings to be tough in FY13E and to look up in FY14E as the stage is set for interest rates to come down and the domestic economy to pick up while commodity prices appear weak (amid a global set-up).”
“The government is in a mood to bring the economy back on the high-growth path and, we feel, it can be a big positive if the government carries on with further reforms,” Shah of Kotak Securities said.
Dinesh Thakkar, chairman and managing director of Angel Broking, said: “The optimism in the market is justified with so many things falling in place slowly but surely. Among them, the government’s perseverance to get reforms through commands a particular mention.”
Angel Broking’s top picks among the large-cap stocks include Axis Bank, Crompton Greaves, ICICI Bank, Lupin, Tata Steel and Wipro, while among the mid-caps, it has picked DB Corp, MRF and United Phosphorus.
Aditya Birla Money’s Diwali picks include IDFC, ING Vysya Bank, Tata Global Beverage, Tech Mahindra, Bajaj Auto, Hindustan Zinc and Cairn India.
Motilal Oswal Financial Services has a smaller basket of Diwali stock picks that comprises ICICI Bank, Tata Motor/DVR, Dr Reddy’s Laboratories.
The list of top picks by Ajay Bodke, head investment strategy & advisory at Prabhudas Lilladher, has both large-cap and mid-cap stocks.
Among the large-cap stock picks are Infosys, ICICI Bank, Wipro, Cairn India, Power Grid, Axis Bank, Maruti Suzuki, Dr Reddy’s Laboratories, Adani Port & SEZ.
Prabhudas Lilladher’s mid-cap picks include Yes Bank, Mahindra & Mahindra Financial Services, Jammu & Kashmir Bank, IPCA, Torrent Pharmaceuticals, Amara Raja Batteries, Persistent Systems and NIIT Technologies.
“We prefer large-caps and mid-caps, in terms of sectoral preference. We expect auto (overweight on four-wheelers and underweight on two-wheelers), pharma (due to earnings visibility), telecom, banking (positive on private banks, neutral on public sector banks) to outperform, while we are neutral on capital goods (due to policy inaction), IT (due to global macro headwinds), FMCG (due to valuation concerns) and cement,” said Pandey of ICICIdirect.
“We expect infrastructure and real estate (due to stretched balance sheets), oil & gas (due to subsidy burden), power (due to delay in reforms) and metals (due to global slowdown) to underperform,” he said.
ICICI Securities’ muhurat picks are SBI, Coal India, Lupin, Marico, JK Lakshmi Cement, Glenmark Pharma and Pantaloon Retail.
Angel Broking’s market strategy for the new Samvat includes going overweight on private banks among the rate-sensitive stocks and also on other quality stocks in export-oriented sectors like IT and pharma. “Private banks have much better capital adequacy compared with PSU banks and they continue to expand their branch networks at a healthy rate. So we expect them to continue gaining market share in loans and low-cost deposits. Also, in the near term, their asset quality will remain healthy, unlike PSU banks, in spite of the macro environment,” the brokerage said.
“Export-oriented sectors are also bound to benefit from the rupee’s sharp depreciation over the past year. So even after the good performance of most of these stocks, we recommend selective IT and pharma stocks, which are still reasonably valued in our view,” Angel Broking said.
“We also recommend a few turnaround stories that are otherwise structurally strong businesses and available cheaply at this point, such as Crompton Greaves in the capital goods space,” the brokerage said in its market strategy note. zz