The Promising Stars of Samvat 2073

After a rather volatile year, frontline indices Sensex and Nifty are likely to end Samvat 2072 with gains of about 7-10 percent. Samvat 2072 was all about the mid and smallcap indices which outperformed the benchmarks with stellar gains of 24 percent and 19.78 percent respectively.

Markets corrected about 11 percent in the first few months after Diwali last year but bounced back on better monsoons, the progress in India’s reform agenda, and the favourable global backdrop. Benchmarks took a hit after the Bharatiya Janata Party’s (BJP) setback in the Bihar elections and globally, following the Brexit referendum.

Markets were driven by policy measures like the allocation of coal blocks, telecom spectrum auction, deregulation of petrol and diesel prices, gas price reform, foreign direct investment in insurance and defence, reduction in the repo rate, the Seventh Pay Commission rollout, and the passage of GST Bill among others, according to a Motilal Oswal Securities report.

Samvat 2073

Samvat 2073 awaits investors with some interesting set of stocks that investors should have in their portfolio. This list has been compiled based on 10 brokerage reports and consists of stocks which have been recommended by more than one brokerage.

Amara Raja Batteries

Analyst Recommendations: Of the 21 brokerage houses which cover this stock, 66.7 percent have a ‘buy’ rating, 23.8 percent recommend ‘hold’ and 9.5 percent have a ‘sell’ recommendation, according to data compiled by Bloomberg.

Rationale: Motilal Oswal Securities expects the company to benefit from stable competitive environment, significant free cash flow generation (approximately Rs 260 crore over financial years 2016-18) and stable return on equity of 25 percent. Potential shift of the market from unorganised to organised players when GST rolls out is expected to help the company sustain high growth trajectory, the brokerage said.

Axis Bank

Analyst Recommendations: Of the 57 brokerages which have cover the stock 43.9 percent have a ‘buy’ rating, 36.8 percent recommend ‘hold’ and 19.3 percent have a ‘sell’ rating, according to data compiled by Bloomberg.

Rationale: The bank’s focus on retail assets which is leading to higher current and savings account ratio (CASA), stable net interest margin (NIM) and strong capital adequacy ratio will support future earnings, Geojit BNP Paribas said.

Bajaj Electricals

Analyst Recommendations: Of the 17 brokerages which cover the stock, 52.9 percent have a ‘buy’ rating; 23.5 percent a ‘hold’ rating while 23.5 percent recommend selling the stock, according to data compiled from Bloomberg.

Rationale: A well-entrenched and expanding distribution network should enable Bajaj Electricals to capitalise on demand revival and regain lost market share, HDFC Securities said in a report. Improving cash flows, core working capital cycle, return ratios and reducing debt/equity strengthen that view, the brokerage added.

Bharat Electronics

Analyst Recommendations: Of the 20 brokerage firms which cover the stock, 75 percent have a ‘buy’ rating, 10 percent recommend ‘hold’ while 15 percent have a ‘sell’ rating, according to data compiled by Bloomberg.

Rationale: Bharat Electronics is well positioned to benefit from rising defence expenditure supported by strong manufacturing base and execution track record, Motilal Oswal Securities said in a report.

HDFC Bank

Analyst Recommendations: Of the 55 brokerages which cover this stock 94.6 percent have a ‘buy’ rating, 1.8 percent recommend ‘hold’ while 3.6 percent have a ‘sell’ rating, according to data compiled by Bloomberg.

Rationale: The bank has a CASA ratio of 40 percent, growth outlook of at least 1.3 times the industry growth and improving operating efficiency led by digitalisation initiatives and expected traction in income due to strong expansion in branch network, Motilal Oswal Securities said in a report.

India Cements

Analyst Recommendations: Of the 20 brokerage firms which cover the stock, 60 percent have a ‘buy’ rating, 35 percent recommend ‘hold’ while 5 percent have a ‘sell’ rating, according to Bloomberg data.

Rationale: With improved demand outlook, better focus and stable realisations, India Cements’ profitability is expected to be mended resulting in higher capacity utilisation from the present level, HDFC Securities said in a report.

Persistent Systems

Analyst Recommendations: Of the 34 brokerages, which cover the stock, 50 percent have a ‘buy’ rating, 29.4 percent recommend ‘hold’ while 20.6 percent have a ‘sell’ rating, according to data compiled from Bloomberg.

Rationale: Persistent is expected to report industry-leading dollar revenue growth of 23 percent compounded annual growth rate over financial year 2016-18. The IBM Watson-Internet of Things deal is likely to take the IT firm to next level in financial terms while deepening relationships with its largest client and tapping huge IoT opportunity, Reliance Securities said in a report.

Engineers India

Analyst Recommendations: Of the 17 brokerages which cover this stock 70.6 percent have a ‘buy’ rating, 17.68 percent recommend ‘hold’ while 11.8 percent have a ‘sell’ rating.

Rationale: Engineers India is well poised to benefit from the recovery in infrastructure spending in the hydrocarbon sector, Kotak Securities Private Client Research said in a report.

Natco Pharma

Analyst Recommendations : Of the 14 brokerages which cover the stock, 78.6 percent have a ‘buy’ rating, 14.3 percent recommend ‘hold’ while 7.1 percent have a ‘sell’ rating, according to Bloomberg data.

Rationale: Strong cash flows from limited competition opportunities would not only lead to a leaner balancesheet but also augur well for the company’s future R&D expenses, Kotak Securities Private Client Research said in a report. If the cash flows from these one-off opportunities are channelised well, Natco has the potential to be amongst the big pharma companies over the next few years, the brokerage added.