The Indian stock market has made a spectacular recovery from its March lows. A pick-up in the pace of economic growth after COVID-19 outbreak, vaccine development and positive global market cues have push BSE's Sensex and NSE's Nifty to new all-time highs.
On Thursday, Sensex stretched its winning streak to the fifth day, rising 224 points while Nifty ended above 13,700, led by HDFC, HDFC Bank, TCS, RIL and Bajaj Finance.
The bullish sentiment prevailing in the market have investors looking to pick up any lost opportunity. As the year comes to an end, respected Indian brokerage Motilal Oswal Financial Services Limited in its latest report said that it expects emerging markets to see upgrade cycle and liquidity flows in 2021 as the economic indicators turn positive.
It stays 'Overweight' on IT, BFSI, Healthcare, Telecom and Auto, and has maintained 'Neutral' rating on Consumer.
While it has picked names from various sectors as its bets for the coming calendar year 2021, here are Motilal Oswal's top large caps picks in the finance and banking sector:
1. ICICI Bank
The brokerage said that ICICI Bank continues to see strong growth in retail deposits and has succeeded in building a robust liability franchise over the past few years. The private lender has one of the lowest funding costs among the private banks, it said, enabling it to underwrite profitable businesses without taking undue balance sheet risks.
However, Motilal Oswal expects the bank's asset quality to remain under pressure.
2. Muthoot Finance
Given the improvement in the overall economic environment, the asset quality impact on subsidiaries would not be as bad as earlier anticipated, it further noted. It expects the firm to deliver 20% year-on-year AUM (asset under management) growth in the financial year 2020-21 and a 15% CAGR thereafter.
3. State Bank of India
SBI appears well-positioned to report a strong uptick in earnings as uncertainty recedes significantly, the brokerage said.
Motilal Oswal believes the earnings normalization cycle has begun as the uncertainty due to COVID-19 has receded significantly. It further said that SBI has a strong franchise, both in assets and liabilities, and is gaining market share, unlike other public-sector banks.
Current valuations too are extremely compelling, it added.
Motilal Oswal's stock picks from other sectors for 2021:
- Bharti Airtel
- Hindustan Unilever Limited (HUL)
- Hero MotoCorp
- UltraTech Cement
- Divi's Labs
- Sun Pharma
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