Nifty at 30,000? 16 stocks to buy for up to 78% upside

Geopolitical tensions along with the sharp increase in oil prices have made the global macroeconomic environment highly uncertain, said PL Capital's Co- Head for Institutional Equities Amnish Aggarwal.  

Aggarwal said while India’s growth fundamentals look intact in the longer term, near-term challenges related to inflation, interest rate concerns, and foreign demand are likely to impact economic growth. 

"The current market valuations are already considering these headwinds, but any sustained turbulence may result in further earnings downgrades," he warned in PL Capital's latest India strategy note.

At present, Nifty is trading at 12 per cent discount to its 15-year average price to earnings ratio, testing multiples that it witnessed at the time of GST 1.0 and demonetisation. 

Aggarwal said the probability of market breaching recent lows looks difficult. He said Nifty is trading at 17 times one-year forward earnings per share estimates, which is at 12.4 per cent discount to 15-year average of 19.4 times.

For now, Aggarwal set a 12-month target of 27,080 from Nifty, down from 27,958 earlier. But in his bull case, Aggarwal's team values Nifty at PE of 19.4 times and suggested a target of 30,089 against 30,497 earlier. The brokerage has added stocks such as Fortis Healthcare, Kotak Mahindra Bank Ltd, CESC Ltd, Bharti Airtel Ltd and Apeejay Sunrendar Park Hotels in its high-conviction picks.

Here's the complete list of high-conviction stock ideas by PL Capital, along with their target prices and potential upside:-  

Q4 results

Aggarwal said the March quarter results so far does not reflect the likely impact of increase in inflation due to spike in crude prices, disruption in global supply chain and likely impact of EL-Nino in coming monsoon season. 

Nifty is seen trading at a low PE last seen during the eurozone crisis in 2013, at 13.5 times, in the bear case scenario. PL Capital target for such a worst-base scenario stands at 20,939.

"We expect strong growth in capital goods, telecom, EMS, select Staples, NBFC, AMC, hospitals, power T&D and defense. Auto growth rates are near peak and likely trend in petrol/diesel prices will determine growth rates in coming few quarters," it said.

PL Capital said favourable domestic factors like increased investments in infrastructure, industrial production, and stability in the banking system are likely to underpin sustainable growth.