The Indian market's benchmark indices corrected on 15 October after rising for two straight weeks. While the indices have picked up since, analysts have observed that the rise has been stock or sector-specific, which means that investors could buy quality stocks on dips for long term gains.
As for traders, Vinay Rajani, technical research analyst at HDFC Securities, was quoted on Moneycontrol saying Nifty Bank and Nifty FMCG index hold potential for breaking downward resistance at the moment. "It is expected that whatever rise that we see in the market from here would be backed by banking and FMCG stocks. Short-term traders should not miss the opportunity in these sectors on the long side," he said.
Short term buy calls
Rajani's (from HDFC Securities) "buy" calls for the short term include Bandhan Bank, Colgate Palmolive India and Bata India.
The price target for Bandhan Bank is set at Rs 349, based on technical analysis (a flag pattern breakout on the daily charts) he expects an upside of 9 percent from Tuesday's opening price of Rs 320 apiece.
The price target on Colgate Palmolive (India) is placed at Rs 1,585, nearly 7 percent higher than Tuesday's opening price of Rs 1,480.90 as Nifty FMCG index is on the verge of breaking out from the crucial trendline resistance placed at 30,200. Colgate has a high weightage on the index, which allows it to benefit from the rally that could resume in the sector.
HDFC Securities is bullish on Bata India, which has broken out from the long-term congestion zone. "The short-term moving averages have crossed medium-term moving averages on the upside," said Rajani, setting price target at Rs 1,500.
Long Term Stock Ideas
HDFC Securities said HCL Technologies is among its top picks in the IT sector based on broad-based second-quarter performance and multiple growth vectors.
"HCLT's prowess in cloud infra business is a strong competitive advantage with enterprises accelerating cloud adoption and higher annuity streams supported by P&P upside," the brokerage said.
"The positive outlook is also predicated on (1) strong deal wins with TCV up 35% QoQ, supported by 15 transformational wins (eight in life-science & healthcare vertical) and pipeline at an all-time high, (2) strengthening partner ecosystem with hyperscalers increasing the addressability and client access, (3) continued traction in P&P business with cross-sell opportunities (>12,000 unique customers signings), supported by upgrades/launches (Unica/DRYiCE in 2Q)," it added.
The price target is set at Rs 970 is based on 18x Sep-22E EPS.
Kotak Securities has a "buy" call on Axis Bank with a price target of Rs 600. The brokerage feels that the private lender is well-positioned, given its lower exposure in the SME and self-employed segment. It expects loan growth of 13.6 percent along with NII (net interest income) growth of 14.2 percent in FY22E.
"Our one-year fair value works to Rs 600. The near-term outlook is hazy for all banks but clarity should emerge after the final verdict of Supreme Court on the moratorium case," the analyst added.
Kotak Securities noted that Dalmia Bharat is progressing as per plan to reach 370 lakh tonnes per annum capacity and become the third-largest in India by FY22E.
It has completed the acquisition of Murli Industries having an integrated 30 lakh tonnes per annum cement capacity. It has also consolidated its position in the East and is increasing its presence in the West.
In the absence of new projects, the company can become debt-free (on net debt level) in FY23E, the brokerage said.
The price target is placed at Rs 1,075.
Privatization, although delayed, may lead to an improvement in earnings/FCF profile for BPCL and unlock value for minority shareholders as and when it goes through, the brokerage said.
After the recent sharp correction, the stock now trades at nearly 9 times FY22E and 1.7 times FY22E book value, the brokerage noted adding that the dividend yield has now gone above 5 percent. "In the future, as and when the strategic divestment process starts we can expect re-rating in the stock," it said.
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