Markets once again closed the day higher as investors bet on banking stocks. However, brokers continued to remain upbeat on undervalued stocks and see the potential for some of these stocks to rally from here onwards.
Some warning before we recommend the stocks
Before informing you of the stocks, we need to caution investors that the Sensex is just under 53,000 points. This means that you should be circumspect before investing as some section of analysts believe that the Indian stock markets are over priced at the current levels. The 1-year forward price to earnings multiple for the Sensex stocks has already crossed 22 times. This makes the markets expensive by any stretch of imagination.
Recently, the joint Head of APAC Equity Research at Nomura said that the Indian markets were way costly as compared to other markets like China and Japan. Therefore, investors should exercise due caution. Here are three stocks that top brokerage firms in the country are suggesting to buy.
Mahindra Lifespace Developers
Broking firm Sharekhan has recommended buying the stock of Mahindra Lifespace Developers with a price target of Rs 795, which is significantly higher than the current market price of Rs 685. The company is a leading realty player in the country.
According to broking firm Sharekhan, Mahindra Lifespace Developers is poised to scale up its sales and execution over the next two to three years with a strong management team at the helm of having a credible experience in its respective fields.
"Further, the company is expected to benefit from the government's relentless focus on affordable housing segments, rising affordability levels, favourable state government policies for real estate, and ample inorganic growth opportunities in the sector. The company's low gearing (current consolidated net debt to equity at just 0.07x with 7.1% cost of debt) can be utilised to raise debt to fund inorganic expansion and land acquisitions. Overall, we believe Mahindra Lifespace Developers is poised to generate strong presales and execution ramp-up over the next 2-3 years, leading to up tick in net asset value valuation. Hence, we retain Buy on the stock with a revised price target of Rs. 795," the brokerage has said.
Broking firm Anand Rathi has set a target price of Rs 175 on the shares of Hotel major, Indian Hotels Company. The Hotel is a part of the Tata group which owns and operates the Taj chain of hotels along with other hotels.
The brokerage says that the Ginger hotel chain has seen substantial transformation in the medium to long term and the company is leading in new industry signings.
"On the subsidence of the Covid19 pandemic, we expect Indian Hotels to outclass others, driven by its dominance in the Indian hotels sector, superlative brand equity and well-diversified portfolio across business segments and price-points. We retain our Buy on the stock with a new target price of Rs 175, earlier Rs 130 (sum-of-parts, valuing at 19x consolidated FY23E EBITDA From 16x earlier), the brokerage has said.
Motilal Oswal Financial Services Ltd (MOFSL)
Broking firm Geojit, which analyzes nearly 4000 stocks, picks only one stock to invest every month. This month the firm has a buy call on the stock of MOFSL. "If you are bullish on India and bullish on the Indian stock market, then MOFSL is a good proxy to play the theme. Motilal Oswal Financial Services derives most of its revenue related to stock market-related activities. Bullish sentiment does help MOFSL to report smarter growth in its financials," the brokerage has said.
Broking business which accounts for 43 per cent of the revenue has bright future, Geojit says. "Many small brokers are unable to compete due to rising compliance costs and falling broking rates. Also, the new investor needs a digital platform to trade. Many small and medium brokers are unable to spend that kind of money on digital platforms. Due to this, consolidation is happening in the industry," the broking firm has said.
Suggesting to buy the stock of Motilal Oswal Financial Services, Geojit notes that At present, Motilal Oswal has a high score of 87. "The company boast good quality with an Outstanding Current Financial Trend. In terms of valuation, it's trading at a fair Valuation, and Technical indicators are bullish, suggesting upside. It has a medium risk Medium return profile," the brokerage has added.
Investors are advised caution before investing in the stocks above and should only invest if they are able to bear losses. The stocks mentioned above are from three different brokers. Greynium Information Technologies, the author and the brokerage firms should not be held liable for any losses suffered on account of the decisions based on the above article. Please consult a professional
About the author:
Sunil Fernandes, the author of the article is a stock market expert and has spend about 27 years covering stock markets and mutual funds. He has worked with various publications including Hindustan Times, Deccan Herald, Oman Economic Review and Dalal Street Investment Journal. He was also engaged in equity research analysis.