The S&P BSE Sensex and NSE Nifty 50 indexes have advanced 11 per cent and 9.55 per cent each respectively since Diwali last year despite heightened volatility due to Coronavirus -induced lockdown in March. The Sensex and Nifty had a rough ride in Samvat 2076 wherein the Sensex and Nifty fell to multi-year lows of 25,638.9 and 7,511.10 respectively in March as the country went into lockdown to curb the spread of Coronavirus pandemic leading to a complete halt of economic activity. However, the subsequent reopening of the economy lifted the investors' sentiment and the benchmarks again surged to record highs days ahead of Diwali.
"Equity markets had a historical journey in Samvat 2076, as it marked a year of huge volatility, unpredictability, pessimism, divergence and optimism. The markets touched all time high of 12,431 in Jan'20 and then hits 3 year low of 7511 in Mar'20 as COVID-19 pandemic grips the whole world, becoming one of the biggest threats to the worldwide economy," the Mumbai-based brokerage firm Motilal Oswal said in a research report.
"As we enter Samvat 2077, the markets have seen a complete recovery from the Covid lows, in-line with the improving data points and positive corporate commentary. We expect Nifty EPS growth of 4 per cent in FY21 while expecting a sharp rebound in FY22," Motilal oswal added.
With the economic activity recovering fast, more earnings upgrade cannot be ruled out. Further strong global markets can keep the liquidity abundant in the system, thus providing support to the overall market. However, intermittent corrections cannot be ruled out as there is a risk of second wave of Covid-19 and thus sustenance of economic recovery holds the key. From next 12 months perspective, we are positive on IT, Healthcare, Rural-Agri, Telecom, Consumer along with select Financials. We believe another round of fiscal stimulus could help elevate sentiment further.
Here are top Diwali stock picks from Motilal Oswal:
Target price: Rs 650
Motilal Oswal recommends buying Bharti Airtel for a potential upside of 42 per cent. "Bharti's execution has been top-notch in the last few quarters, evident from strong 16 per cent India Mobile EBITDA growth cumulatively in the last two quarters. Robust 10m subscriber adds lead to cumulative ARPU improvement of 5 per cent," Motilal Oswal said in a report.
State Bank of India
Target price: Rs 300
Motilal Oswal has advised investing in the country's largest bank by assets for upside of 37 per cent. "We believe the earnings normalization cycle for SBI has begun and it remains the best play among the PSU banks, on gradual recovery in the Indian economy, with a healthy PCR of 71 per cent, robust capitalization, a strong liability franchise, and improved core operating profitability," the Mumbai-based brokerage firm said.
Target price: Rs 3,700
Motilal Oswal recommends investing on Hero MotoCorp for upside of 26 per cent. "Hero MotoCorp is poised for faster recovery over other 2W peers due to its rural-focused portfolio and market leadership in the entry and executive segments. Considering its improved competitive positioning post BS6, HMCL should continue to see good demand with its economy-executive focused portfolio," the brokerage firm said.
Target price: Rs 1,355
"We expect Infosys to be a key beneficiary in terms of recovery in IT spends in FY22. Infosys remains our top pick within the sector given its headroom for margin expansion and strong deal wins," Motilal Oswal said.
Target price: Rs 5,600
"Ulttratech Cement has a strong pan-India distribution network and preferred supplier status for key infrastructure projects. This places it in a good position to tap into expected growth in both retail and institutional (non-trade) cement demand in India," the brokerage said.
Target price: Rs 525
"ICICI Bank continues to see strong growth in retail deposits and has succeeded in building a robust liability franchise over the past few years which continues to improve. Business trends are improving, with disbursement reaching pre Covid / higher than pre-COVID levels (in some segments)," the Mumbai-based broker said.
Target price: Rs 360
"Crompton Greaves has further consolidated its position in the fans and pumps market, and has become the No.2 player in the Water heaters segment. Despite strong element of pent-up demand playing out recently, we believe underlying demand to be in positive territory, which should sustain/improve going forward," Motilal Oswal said.
Target price: Rs 600
"Dabur's investment case is strong, supported by: (a) dedicated focus on the Herbal segment, (b) power brand strategy, (c) a spate of new launches, (d) an increasing direct distribution reach and (e) cost savings which would be plowed back into the business," Motilal Oswal said.
Target price: Rs 2,611
"We believe PI Industries has levers in place to sustain growth momentum, led by (a) ramp-up in operations of two multi-purpose plants , (b) revenue from the Isagro acquisition, (c) sustained growth momentum in the CSM business, and (d) product launches in the domestic market providing earnings visibility," Motilal Oswal said.
Target price: Rs 3,520
"We are positive on Divi's Labs given favorable demand for its APIs, margin enhancement owing to an increase in the in-house manufacturing of intermediates, and additional revenue from new capex," the brokerage said.