Broking firm, Motilal Oswal has come-out with high conviction stock ideas from the banking and finance space. Accoriding to the broking firm, business growth showed strong momentum for financials in 2QFY21 despite weak economic. Motilal Oswal believes that investors can buy this basket of 5 stocks with a potential upside of 10-12% over a time frame of 1-3 months.
According to the broking firm, earnings for ICICI Bank were in line despite the bank prudently making higher provisions toward COVID-19. Overall, the moratorium book has declined and the bank has built relatively higher provisioning buffer at 1.3% of loans to endure the COVID crisis. The stock of ICICI Bank last trading at Rs 279 on the National Stock Exchange.
According to Motilal Oswal HDFC Bank has delivered strong business growth despite weak economic trends and consumer sentiment. The bank has reflected strong deposit trends, led by CASA.
"Thus, we expect HDFC Bank's strong liability franchise and the fixed rate nature of the book to continue to support the margin trajectory," the broking firm has noted. HDFC Bank was last seen trading at rs 1,145 on the BSE.
Motilal Oswal also has a "buy" call on Housing Development Finance Corporation.
"The company reported key data points on the recent quarter. Clearly, business volumes are returning to normal levels. Individual loan applications increased 12% YoY, and loan approvals were up 9% YoY in 2QFY21.HDFC remains among our top picks in the sector. The Real Estate sector is seeing a gradual turnaround and HDFC is well-poised to benefit from the same," the broking form has noted.
According to Motilal Oswal, the Month-on-month improvement in disbursements and collections is encouraging. Within its product mix, Tractors, Entry-level Cars, and Light Commercial Vehicles are likely to do well. The company has taken over Rs 11 billion COVID-19 provisions over the past two quarters, amounting to nearly 2% of the loan book. Mahindra and Mahindra Financials was last seen trading at Rs 131 on the National Stock Exchange.
The latest report of Motilal Oswal has also observed that two aspects of CIFC's Vehicle Finance business stand out v/s most peers: (i) it is well-diversified across product segments and (ii) there is no state-level concentration - the largest state accounts for only 11 per cent of the total portfolio. Products linked to farm income, such as tractors, are likely to fare better given the strong monsoons and healthy rabi crop harvest.