BEL, AEL, ICICI Bank, Eternal, BSE, Dixon Tech, Coforge, RBL Bank: MOFSL's top picks

Risk-reward profile for domestic equities is becoming increasingly favorable, enhancing India’s attractiveness from an FII perspective, MOFSL said in its latest monthly Bulls & Bears report, as it suggested a dozen of Nifty and non-Nifty stock ideas after a 'picture-perfect' June quarter.

Nifty stock ideas

In the Nifty pack, MOFSL suggested stocks such as Bharti Airtel, ICICI Bank, SBI, Titan Company, Adani Enterprises Ltd (AEL), Mahindra & Mahindra Ltd (M&M), Bharat Electronics Ltd (BEL), Eternal Ltd, Hindalco Industries, Shriram Finance Ltd, InterGlobe Aviation and Apollo Hospitals.

Non-Nifty stock ideas

Non-Nifty ideas included TVS Motor, BSE, SBI Funds Management,  GE Vernova T&D, Lenskart Solutions and Indian Hotels. Besides, MOFSL likes Meesho, Dixon Technologies (India) Ltd, Coforge Ltd, Radico Khaitan, Kirloskar Oil Engines, RBL Bank, TBO Tek, and Arvind.

"With the pace of earnings growth strengthening and the breadth of growth improving, we expect the risk-reward profile to become increasingly favorable, enhancing India’s attractiveness from an FII perspective," MOFSL said.

SMIDs at new highs

The brokerage noted that Nifty has largely remained flat over the past one year, weighed down by persistent geopolitical headwinds, relative valuation concerns, and sustained FII selling, particularly in index heavyweights,

In contrast, it said, select pockets of the small and midcap segment have continued to deliver  strong earnings growth, driving the Midcap and Smallcap indices to new all-time highs.

"The 1QFY27 corporate earnings season concluded on a strong note, demonstrating widespread outperformance across all key aggregates. The earnings growth and beat were led by Financials, Metals, Oil & Gas (ex-OMCs), and Automobiles as well as sectors such as Chemicals, Textiles, and Real Estate. OMCs expectedly dragged the overall aggregates," MOFSL said.

Market valuations

MOFSL said Nifty is trading at a 12-month forward P/E ratio of 18.4 times, a 12 per cent discount to its long-term average of 20.9 times. Further, its price to book value of 2.7 times represented a 6 per centdiscount to its historical average of 2.9 times.

On a 12-month trailing P/E basis, Nifty at 21.2 times, is 9 per cent below its LPA of 23.2 times. At 3 times, the 12-month trailing P/B ratio for the Nifty is near its historical average of 3.2 times (at a 5 per cent discount).

"Notably, two-thirds of the sectors trade at a premium to their historical averages. Healthcare, PSU Banks, Capital Goods, Utilities, Metals, Automobiles, and Consumer Durables trade at a premium to their long-period average (LPA) valuations, while Consumer, Private Banks, Technology, Retail, and Real Estate trade at a discount to their LPA," MOFSL said.