The Indian stock market has done really well since last Diwali. The Nifty 50 has increased by about 9 percent since the previous Samvat, but the broader markets have done even better.
The Nifty Smallcap 100 index rose 28%, and the Nifty Midcap 100 index rose 26%. PSU Bank index rose by 44%, Real Estate by 37%, and Oil & Gas by 2%, with only the latter ending in the red.HDFC Securities forecasts continued market volatility through the first half of 2024, with attention focused on the results of both local and national elections and their potential geopolitical ramifications.
Although domestic fund inflows have remained strong, foreign portfolio investor (FPI) flows will need to resume once global risk appetite recovers. According to a report by HDFC Securities Retail Research, “we continue to favor domestically focused businesses and favor opportunities in the sectors like Materials, Pharma, Oil & gas, Small Finance banks, Petrochemicals, consumption, Power EPC and restructuring plays for the next year.”
The brokerage’s top 10 Diwali stock recommendations for Samvat 2080 are themed around these ideas.
HDFC Securities recommends the following stocks for Diwali: Dr. Reddy’s Laboratories, Equitas Small Finance Bank, GAIL (India), Godrej Industries, Grasim Industries, Gujarat Alkalies & Chemicals Ltd Chemicals, Indian Oil Corporation, Kalpataru Projects International, Reliance Industries, United Spirits, and Indian Oil Corporation.
HDFC Securities Retail Research found that these stocks have strong fundamentals and a reasonable margin of safety in their value, making them attractive investments.
Dr Reddy’s Laboratories | Buy Range: ₹4,850-5,400 | TP: ₹6,250
HDFC Securities forecasts Dr Reddy’s US business to increase at a CAGR of 11% over FY23-25E including gRevlimid revenues. Sales are expected to expand at a CAGR of 10%, driven mostly by expansion in the domestic formulation market and the United States.
On the strength of specialty prospects in the US market, we anticipate maintaining an operating margin of 26.5-27.5%. Healthy revenue and solid operating performance over the same time period are driving expectations of a 16.5% CAGR in net profit.
Brokerage firm recommends ‘Buy’ on Dr. Reddy’s Laboratories with a target price of 6,250 per share until the next Diwali, which is in about one year.
Equitas Small Finance Bank | Buy Range: ₹82-92 | TP: ₹112
The brokerage anticipates a 24% compound annual growth rate (CAGR) in net interest income (NII) and 31% in net profit from fiscal years (FY) 23 through 25E, while the loan book is anticipated to expand by 27% CAGR during the same time period. As the collection efficiencies have increased and economic activities have acquired momentum, the asset quality has seen incredible improvement.
By the conclusion of FY25E, it is anticipated that ROAA will have increased to 2%. The brokerage firm predicted that it may show constant increase in return ratios due to rising advancements and contained slippages.
It advises buyers to purchase shares between 82 and 92, with a price target of 112.
GAIL (India) | Buy Range: ₹106-120 | TP: ₹140
In addition to offering a respectable dividend yield, GAIL’s dominant position in the natural gas transportation market, cost-effective operations, experienced management, attractive valuations, and strong financials are important advantages supplied by the stock. Over FY23-25E, HDFC Securities predicts that a combination of a robust domestic supply environment, higher margins in trading, and a more favorable pricing scenario in the LPG and petrochemical sectors should significantly boost consolidated EBITDA.
It forecasts an increase in EBITDA of 48% for FY24E and a rise in net income of 46.4% for FY25E.
Investors can buy the stock in the ₹106-120 area with a goal of ₹140 (10x FY25E EPS & 8.8x FY25E EV/EBITDA) till next Diwali, it said.
Godrej Industries | Buy Range: ₹555-624 | TP: ₹735
Retail Research at HDFC Securities reports that while the standalone firm is under some pressure in the foreseeable future, its consumer product and real estate businesses are doing well and the outlook is healthy. In addition to the discount narrowing, it anticipates value unlocking as a result of the brothers’ divorce.
The stock’s target price of 735 is within the brokerage’s recommended purchasing range of 555-624.
Grasim Industries | Buy Range: ₹1,700-1,925 | TP: ₹2,275
The brokerage firm thinks Grasim Industries’ cement and financial services businesses are doing well, and the outlook is healthy, but that the company’s standalone operation faces some pressure in the near term.
A re-rating of the stock is possible as a result of the company’s accelerated expansion in paints, which reduces the share of commodities industry in favor of branded paints business and is expected to provide the company with its next growth spurt.
Indicating a target price of Rs. 2,275, this range tells investors to buy the stock between Rs. 1,700 and Rs. 1,925.
Gujarat Alkalies & Chemicals | Buy Range: ₹638-718 | TP: ₹875
The brokerage firm forecasts that the company will see significant earnings growth in FY25E as a result of rising caustic soda pricing and falling energy expenses. The stock is trading at 13x FY25E EPS at the current market price. Until the next Diwali, the stock can be purchased by investors in the range of 638-718 at a price target of 875 (16x FY25E EPS).
Indian Oil Corporation | Buy Range: ₹78-90 | TP: ₹103
Indian Oil Corporation’s investments and non-core assets account for approximately all of its worth. We expect IOCL’s robust earnings trend to continue in the next quarters, driven by several drivers, according to HDFC Securities.
It anticipates that earnings will continue to grow as solid demand in the petrochemicals market allows for a turnaround. The trading business expects that ongoing demand for petroleum products and falling crude oil prices will drive more profitability with its broad and superior refining marketing mix.
It recommends purchasing the stock in the 78-90 range with a target price of 103 per share.
Kalpataru Projects International | Buy Range: ₹580- 660 | TP: ₹795
Kalpataru Projects International is predicted to grow revenue, EBITDA, and PAT at a CAGR of 18%, 27%, and 36% between FY23 and FY26E, respectively. The company is trading at an appealing price of 9x FY26E EPS, which is significantly lower than that of Indian peers. According to the brokerage, such a discount could be the result of fewer contributions from the India region.The company’s order book stood at 47,332 crore as of June 2023, demonstrating a strong visibility of 3.3x of FY23 revenue. The company’s excellent bidding pipeline suggests that business generation will continue to be positive.
According to HDFC Securities Retail Research, investors can buy the stock in the 580-660 range for a target price of 795 (10.5x FY26E EPS) till the following Diwali.
Reliance Industries | Buy Range: ₹2,075-2,32 | TP: ₹2,695
Large technological advancements and ambitious development objectives position the retail, telecommunications, and new energy divisions of Reliance Industries to emerge as growth drivers within the next two to three years. HDFC Securities anticipates that the organization will disclose taxable income, EBITDA, and consolidated revenue CAGRs of 12.3%, 13.5%, and 10%, respectively, for the fiscal years 2023-25E.
Investors may purchase Reliance Industries shares between ₹2,075-2,325 with the aim of reaching a target of ₹2,695 by the time of the subsequent Diwali.
United Spirits | Buy Range: ₹915-1,040 | TP: ₹1,195
According to the brokerage, United Spirits will continue to focus on achieving profitable growth, which will be driven by double-digit topline growth, ongoing A&P expenditures, improved pricing and premium mix, and productivity gains.
Investors can purchase the stock in the 915-1,040 range for a target price of 1,195, according to the company.
Disclaimer: The opinions and recommendations shown above are those of individual analysts or brokerage firms, not Mint. Before making any financial decisions, we recommend that investors consult with competent specialists.
Akash Jha
