Top Picks In October 2023: 6 Largecap Stocks Are Good To Bet, 14-34% Upside Seen; Maruti, SBI, ITC In List

The start of October month has been bearish for both Sensex and Nifty 50 as the benchmarks recorded nearly 1% downside in less than two trading sessions. With the stock market facing extreme volatility, it is prudent that investors pick their bets wisely and buy value-adding stocks. In the large-cap basket, six stocks from diverse segments such as auto, FMCG, and banking are seen as best bets for October 2023.

These stocks are ICICI Bank, SBI, Bank of Baroda, Maruti Suzuki, Varun Beverages, and ITC by Axis Securities.

Axis Securities Top Picks basket has continued to deliver impressive returns of 32% in the last year, beating by a wide margin the 15% return posted by the benchmark Nifty 50 index over this period. In September 2023, the brokerage's top picks basket inched up further by 3.2%, marking an excellent outperformance of 1.2% over the Nifty 50 index which was up only 2% MoM.

In its note, the brokerage said, "These results strengthen our confidence in our thematic approach to Top Picks selection." Thereby, Axis Securities has picked the above-mentioned six stocks in large-cap space for October 2023.

According to the brokerage, at current valuations and the prevailing scenario of higher bond yields, rising crude prices, and the stronger dollar index, large-caps appear to provide more margin of safety than Midcaps and Smallcaps. Nonetheless, the long-term story of the broader Indian market continues to remain attractive.

Here is the investment rationale by Axis Securities in these six large-cap stocks:

1. ICICI Bank:

As per the brokerage, the bank has been outperforming its peers and has been firing on all cylinders. Also, the bank has ticked most boxes on growth, margins, and asset quality.

It added, "We continue to like ICICIB for its (1) Strong retail-focused liability franchise, (2) Buoyant growth prospects, (3) Stable asset quality along with healthy provision cover, (4) Adequate capitalization, and (5) Potential to deliver robust return ratios. We maintain a BUY rating on the stock with a target price of Rs 1,250/share (SOTP basis core book at 3x FY25E and Rs 165 Subsidiary value)."

On October 4th, ICICI Bank shares ended at Rs 930.70 apiece, down by 1.03% on BSE.

From the current price level, ICICI Bank has a potential of 34.3% upside ahead.

2. Maruti Suzuki:

MSIL has completely refreshed its portfolio with the recent addition of Invicto (the only vehicle with Rs 20 Lc plus price point) to Jimny and Fronx launched earlier in Q4FY23. The higher share of premium MPV/SUVs in the sales mix will drive the Revenue/EBITDA/PAT growth in FY23-26E.

Also, the brokerage said, "Strong order book, higher share of premium SUVs, CNG vehicles in the sales mix to improve ASP in FY24/25; further improved chip supplies and stable commodity prices to drive Revenue/EBITDA/PAT CAGR of 14%/16%/16% from FY23-26E. We maintain our BUY rating on the stock and value it at 28xP/E of its Sep'25E EPS (roll forward from Jun'25 EPS)."

On BSE, Maruti shares ended at Rs 10134.90 apiece, down by 1.99% on Wednesday.

From this price level, this auto stock has the potential to rise over 16%.

3. State Bank of India (SBI):

Among PSU banks, SBI remains the best play on the gradual recovery of the Indian economy on account of its healthy PCR, robust capitalization, strong liability franchise, and improved asset quality outlook.

"We believe despite the margin pressures, SBIN remains well poised to deliver RoA/RoE of 1%/15-17% over FY24-25E supported by stable credit costs and steady cost ratios. We maintain our BUY rating on the stock with a target price of Rs 715/share (core book at 1.3x Sep'24E and subsidiaries at Rs 164/share)," the brokerage's note said.

On October 4th, the largest PSU bank lender's shares dropped by 2.8% to end at Rs 585.95 on BSE. From the current price level, the stock has a potential of 22% upside.

4. Varun Beverages:

Axis Securities believes VBL is expected to continue its strong growth momentum on account of 1) the Normalcy of operation and market share gains of newly acquired territories post-COVID-19 disruptions, 2) The management's continued focus on the efficient go-to-market execution in acquired and underpenetrated territories as reflected in its recently commissioned Bihar plant operations (it has started gaining market share), 3) Expansion in its distribution reach to 3.5 Mn outlets in CY23 from 3 Mn currently, 4) Focus on expanding high-margin Sting energy drink across outlets coupled with increased focus on expansion of Value Added Dairy, sports drink (Gatorade) and Juice segment and 5) Robust growth in the International geographies.

Hence, the brokerage has recommended buying with a target price of Rs 1,050 on Varun Beverages.

From the current price level of Rs 919.90 apiece on BSE during the October 4th session, Varun Beverages' share price has the potential for over 14% upside.

5. Bank of Baroda:

With strong advances growth, stable margins, healthy NII, asset quality under control and adequate capital, the brokerage believes that the bank is well-positioned to deliver a sustainable RoA of 1% going forward.

It added, "We believe current valuations of 0.9x FY25E ABV are attractive and believe BoB is ripe for re-rating, especially given its growth potential. We value BoB at 1.1x FY25E ABV to arrive at a target price of Rs255/share."

On BSE, BoB shares are currently at Rs 212.45 apiece as of October 4th, and from this level, the stock is seen to rise by 20%.

6. ITC:

The brokerage believes that the narrative around the ITC is getting stronger as all its businesses are on the right track - 1) Stable cigarette volume growth led by market share gains and new product launches; 2) FMCG business reaches the inflexion point as its EBIT margins expected to inch up further and would be driven by - the ramp up in the outlet coverage, effective implementation of localisation strategy, driving premiumisation, leveraging technology on demand and supply side; and
moderation of raw material input cost; 3) Strong and stable growth in hotels as travel, wedding, and corporate activities pick up; 4) Stedy and decent performance in paperboard and agribusiness witnessed in the last few quarters. Moreover, reasonable valuation among the entire FMCG pack provides a huge margin of safety.

Hence, Axis Securities has set a target price of Rs 540 with a buy rating. From the current price level of Rs 436 apiece as of October 4th, ITC shares are expected to rise by 24% on BSE.

Disclaimer:

The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.