The domestic markets will enter into Samvat 2072 cautiosly as investors digest Bihar election verdict and gear up for the US Federal Reserve's first interest rate hike, which Fed Chair Janet Yellen herself said is a 'live possibility' in December. The new Samvat will kick off from November 11.
Though the benchmark indices - the S&P BSE Sensex and the CNX Nifty - managed to hit the 30,000 and 9,100 levels, respectively during Samvat 2071, riding on the euphoria created by a reformist government at the Centre, both indices pared significant gains as the year progressed. The 30-share index shed 0.87 per cent, while 50-share index added 0.55 per cent against their Wednesday's closing figures since the beginning of Samvat 2071 on October 23, 2014.
Broking firm Angel Broking expects the Sensex to hit 31,500, a 16 per cent upside from the present levels with a 12-18 month horizon.
Here are top 10 stocks recommnded by top brokerages to buy this Diwali:
Prabhudas Liladhar (PL)
1) Infosys: The brokerage expects Infosys to return to industry revenue growth by end FY16 and grow ahead of industry in FY17. They believe multiple strategic initiatives (Zero Bench, Zero Distance, ) spearheaded by CEO Vishal Sikka are at various stages of implementation and signs of early success have been reflected in the first half of fiscal year 2015-16 in terms of strong revenue growth, deal wins, better client mining and efficiency benefits.
"We expect full benefits to flow in by FY17-18 and that should result in Infosys leading industry growth with margin improvement. The stock is trading attractive at ~17 times of FY17 earnings per share (EPS). We have BUY rating on the scrip with a target price of Rs 1,440," said brokerage.
2) HDFC Bank: Analysts at Prabhudas Liladhar believe the private lender reported strong quarter as loan growth pick-up was sharply led by strong traction in both retail and wholesale loans. Revenue growth was also broadly in-line though margins compressed by 10 bps sequentially on expected lines.
"The bank is well placed to continually gain market share on back of its highly competitive base-rate and robust digital platform. HDFCB remains one of the top-picks for us and we maintain 'buy' with a target price of Rs 1,200," said brokerage.
3) SBI: Brokerage believes State Bank of India has shown some early signs of stabilization in asset quality as fresh slippages have trended lower while management sounded optimistic about revival in capex cycle.
"SBI is well capitalized, has robust other income and has invested significantly in building up its digital offerings which distinguishes it against its other PSU peers," said brokerage.
"The public sector lender has been focusing on retail segment and has gained market share in highly competitive mortgage business while it remains cautious on mid-corporate and SME segment. We retain 'buy' with a target price of Rs 350 which corresponds to 1.8 times Mar-17 ABV," added brokerage.
4) Tata Motors: Broking firm Prabhudas Liladhar is positive on Tata Motors and has a 'buy' rating with a price target of Rs 518.
"We believe that JLR faces a short-term negative outlook due to weakness in China. However, with its strong product portfolio, JLR is in a good position to counter the slowdown there as well as increase its sale in other geographies, thereby resulting in a positive outlook from a medium-to-long-term perspective," said broking firm.
"In the India business, with M&HCV volumes already on the move, and a recovery expected in LCVs by fourth quarter of FY16, the turnaround in India operations would get completed in FY17," added brokerage.
5) JK Laxmi Cement: JK Lakshmi cement , the 5th largest cement producer in North India with a ~7% market share in the region with a capacity of 9mtpa, is backed by 1) one of the most efficient operations, 2) entry into the most profitable eastern region with a capacity of 2.7mtpa, and 3) increasing consolidation in Gujarat (~40% of its total volumes), said brokerage.
PL ranked JK Laxmi as one of their top pick in the sector with a target price of Rs 450 at EV/T of US$100 FY17E capacity of 12m tonnes.
1) Ashok Leyland: "Ashok Leyland is the second largest medium and heavy commercial vehicle (MHCV) manufacturer in the country, commanding a market share of about 28%. The MHCV segment is in an upcycle, given the uptick in economic growth which should result in better freight movement," said brokerage.
The firm believes Ashok Leyland's margins are likely to improve 360 bps year-on-year over FY2015-17 period on account of double-digit growth in MHCVs and reduced discounting. It assigned EV/EBIDTA multiple of 13 times to FY2017E EBIDTA to arrive at a target price of Rs 111 per share.
2) HCL Tech: Angel Broking expects HCL Tech to post a dollar and rupee revenue CAGR of 13.0% and 13.2%, respectively, over FY2015-17E. The Management expects EBIT margins to sustain at 21-22%, driven by moving work offshore and efficiency-led gains.
"We expect the EBIT and PAT to post a 12.9% and 10.6% CAGR, respectively, over FY2015-17E. At current valuations, the stock is attractively valued and hence we maintain our 'buy' with a price target of Rs 1,132," said brokerage.
3) Larsen & Toubro:L&T is sitting on an order book of Rs 2,44,097 crore, as of September quarter of fiscal year 2015-16, which gives revenue visibility for over the next 30 months. Considering the huge order book, the brokerage expects L&T to report a 12.5 per cent year on year top-line growth for FY2016E.
"We are of the view that L&T is a proxy play for investors wanting to ride on the revival of the Indian infrastructure growth story. We recommend a 'buy' on the stock with a target price of Rs 1,646," said brokerage.
4) Amara Raja Batteries: Angel Broking believes Amara Raja is a well diversified auto ancillary player having presence across the automotive and the industrial segment and a broad OEM as well as replacement customer base.
"We believe Amara Raja is a high quality stock to play the auto sector revival. We assign a P/E multiple of 28x to FY2017E earnings and arrive at a target price of Rs 1,040 per share," said broking firm.
5) Axis Bank: "Healthy pace of branch expansion and a strong distribution network continue to be the driving force for the Axis bank 's retail business," said the brokerage.
"While the near term asset quality environment remains challenging, the bank will be able to absorb the credit costs given the adequate profitability. Further, given its strong CASA and retail network, the bank is positioned strongly to benefit once the macros revive," added the broking firm," added the brokerage.
Angel Broking recommended a 'buy' rating on the stock with a target price of Rs 630.