Vaccine Bets Have Analysts Favoring Sector Leaders in India
A refrigerated container carrying Sinovac Biotech Ltd. coronavirus vaccines exits from a cargo aircraft at Guarulhos International Airport in Sao Paulo, Brazil. (Photographer: Jonne Roriz/Bloomberg)

Vaccine Bets Have Analysts Favoring Sector Leaders in India

The global rotation into value shares is prompting analysts in India to circle back to market leaders in sectors worst-hit by the pandemic -- including hotels, aviation, cinemas, and banking.

“The risk with the biggest companies from a balance sheet or funding perspective is lower,” said Aditya Narain, head of research at Mumbai-based Edelweiss Financial Services Ltd. “The leader has the greatest wherewithal to hang in there if business remains modest,” so it’s better to avoid mid-sized and smaller companies even while riding the rally on vaccine developments and economic recovery, he said.

Below are some of analysts’ top picks in India’s $2.3 trillion equity market. All stock moves are year-to-date.

Hospitality: Indian Hotels Co. (-21%)

  • “Once the dust settles, we will see more leisure travel and high-end business travel coming back, rather than mid-range business travel,” said Narain. “If there is a stock that will do better one-to-two years down the line, it’s probably Indian Hotels”
  • Analyst ratings: 8 buys, 4 holds, 0 sells: data compiled by Bloomberg
  • “Indian Hotels’ debt-equity ratio is manageable and they have the backing of the Tata group, so are well-positioned to handle it,” said Jyoti Roy, an equity strategist at Angel Broking Ltd. in Mumbai
Vaccine Bets Have Analysts Favoring Sector Leaders in India

Airlines: InterGlobe Aviation Ltd. (+27%)

  • “The next six months could see some pent-up demand for flights,” said Hemang Jani, head equity strategist at Motilal Oswal Financial Services Ltd. in Mumbai. “We are positive on Indigo, the only thing is that after India’s re-opening, the stock has run up even before we see the numbers on the ground”
  • Analyst ratings: 15 buys, 5 holds, 1 sell

Cinemas: PVR Ltd. (-31%)

  • “In these difficult phases, it makes sense to invest in the top company rather than smaller rivals who look cheaper,” said Motilal Oswal’s Jani
  • Analyst ratings: 18 buys, 6 holds, 4 sells
  • This sector has more headroom to bounce back compared with others, and will see demand recover after the return of big movie releases, according to Angel Broking’s Roy

Financials: ICICI Bank Ltd. (-11%)

  • ICICI Bank compares favorably in terms of valuation with rivals of a similar size, while its insurance and brokerage units have also performed well recently, according to Jani
  • Analyst ratings: 54 buys, 0 holds, 0 sells

©2020 Bloomberg L.P.

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