The sustained boom in global tech spending, a revival of local housing demand and a rebound in bank earnings are expected to be among the key drivers of gains for India's stock market this year.
Analysts remain bullish, projecting a rise of about 15% for the NSE Nifty 50 Index over the next 12 months, according to sell-side estimates compiled by Bloomberg. That's on top of the gauge's 138% rally from its March 2020 low, the best performance among the world's major equity markets for this period.
Despite some concerns about lofty valuations and a gradual unwinding of easy-money policies, India's benchmark is among those leading gains in Asia so far in 2022 with an advance of more than 4%.
Here are the top sector and stock picks, according to some leading brokerages:
A gauge of the nation's top 10 software providers has more than tripled from its pandemic low, as the crisis spurred transformation of the way the world does business. While India's leading IT companies are grappling with rising wages and higher attrition levels amid demand for talent, analysts say strong demand for new technology will continue.
“Digitization has meant that Indian IT companies are growing at the fastest pace seen over the last decade,” Santosh Kumar Singh, head of research at Motilal Oswal Asset Management Co., wrote in a note. “This theme may remain one of the predominant ones.”
* Top picks include Tech Mahindra Ltd., Infosys Ltd., Tata Consultancy Services Ltd. and HCL Technologies Ltd.
Following a multi-year credit crisis exacerbated by the Covid-19 economic hit, analysts expect the worst has passed for lenders' asset quality and loans.
“Banks have focused on balance sheet strengthening,” steadily building up their provisions, Pankaj Pandey, head of research at ICICI Direct, wrote in a note. “The retail segment has been the key driver of credit offtake and will continue to remain so, coupled with agriculture and the micro, small and medium enterprise segment.”
* Top picks include State Bank of India, ICICI Bank Ltd. and Axis Bank Ltd.
The pandemic triggered a correction in property prices in India even as the work-from-home trend helped boost demand for house ownership. Strict lockdowns pushed out small and marginal players, and expanded the market for strong developers.
“Housing affordability today is at the best levels we've seen in the last 20 years and broadly, we are seeing job creation in the economy supporting that thesis nicely,” Mahesh Nandurkar, head of research at Jefferies India Pvt., told Bloomberg Television last week. “We are in for a housing-driven economic supercycle over the next five years.”
* Top picks include Godrej Properties Ltd., Oberoi Realty Ltd., Sunteck Realty Ltd., Phoenix Mills Ltd. and Prestige Estates Projects Ltd.
The health-care sector is expected to remain in focus as the world continues to deal with the coronavirus.
“Beyond the pandemic, we expect an improvement in core businesses, driven by better execution on product approvals and regulatory clearances particularly from the U.S. FDA,” Saion Mukherjee and Neelotpal Sahu, analysts at Nomura Financial Advisory and Securities (India) Pvt., wrote in a note.
* Top picks include Ipca Laboratories Ltd., Max Healthcare Institute Ltd., Gland Pharma Ltd., Cipla Ltd., Sun Pharmaceutical Industries Ltd. and Aster DM Healthcare Ltd.
Brokerages surveyed for top picks across the different sectors include: Nomura, Jefferies, Yes Securities, Kotak Securities, HDFC Securities and ICICI Direct.