Sensex and Nifty gained 9.4% and 8.7% in the month of August as large-cap stocks rallied, outperforming broader markets. With the recent rally in domestic equities, it seems that investors are satisfied with the first quarter results of India Inc. Expectation of multi-year investment cycle and revival of economic activity have helped Indian stocks markets outperform other emerging markets, said analysts at Kotak Securities. The brokerage firm expects net profits of Nifty 50 constituents to grow 31% this fiscal year and by 14% in the next one. Although optimistic about Dalal street’s outlook, Kotak Securities is advocating for a stock-specific approach now.
“Higher spending by consumers during the festive season could keep investors interested in discretionary sectors and stocks. Since the broader market valuation remains rich, investors need to follow a stock-specific approach with higher preference to large-caps, followed by mid-caps,” they said. The brokerage firm expects banks/financials and metal/mining sector to drive a significant part of earnings growth. Analysts have picked these stocks, expecting an upside potential of at least 12%.
BPCL – Buy
Target price: RS 550
Bharat Petroleum Corporation Limited has rallied 5% in the last five trading sessions. In the April-June quarterly results, BPCL’s marketing margins normalised, increasing by 13% from the previous quarter. To add to that, the company reported that gasoline demand has recovered to 5% above the pre-Covid level in July 2021. Although EBITDA and Adjusted net profit declined for BPCL, Kotak Securities remains positive.
Analysts expected recovery in refining margins led by improvement in global demand and the potential value unlocking from the privatization of the company. Currently, the stock trades at Rs 492 per share, translating to an upside of 12% from current levels.
InterGlobe Aviation – Buy
Target price: Rs 2,250
The aviation industry has been lagging behind owing to coronavirus and travel restrictions. However, the private carrier is the strongest among peers in India and is a net cash company. The company is expanding its base and adding new routes to increase its market share and improving capacity as well. However, this fiscal year the company is expected to report net loss.
Kotak Securities sees IndiGo as the market leader that could benefit from the pandemic. The brokerage firm is expecting earnings per share of Rs 122.6 in the next financial year. The upside potential from current levels for InterGlobe Aviation is 14%.
Target price: Rs 1,920
Larsen & Toubro’s order book stood at Rs 3.23 lakh crore at the end of the April-June quarter. This was up 6% on-year. The company has given guidance of low to mid-teens order inflow and revenue growth for this financial year. Kotak Securities expects L&T’s execution to normalise going ahead as labour availability improves. “We assume a 27% EPS growth over FY20-24, retain 17x multiple for the core E&C,” they said. The potential upside to the target price is 13.4%
Target price: Rs 1,425
SBI Life share price has zoomed 5% in the last five days. In the first quarter, the company saw its net profit declined to Rs 223 crore as claims increased. However, the value of the new business during the same quarter expanded 255 bps on-year basis. SBI Life’s Annualised premium equivalent rose 28% on-year basis while individual protection improved 86%. These encouraging trends keep analysts bullish on SBI Life Insurance. Kotak Securities sees an upside of 15% from today’s price.