Indian market created history in the runup to Dussehra 2021 as the Sensex climbed above 61000 for the first time, while the Nifty50 surpassed 18300 on Thursday.

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The S&P BSE Sensex hits a record high of 61,216, while the Nifty50 hits a high of 18,323. Both the benchmark indices have rallied by about 30 percent so far in the year.

In the run-up to Dussehra and Diwali, the market continues to hit new lifetime highs due to continued improvement in economic activities, liquidity from retail investors as well as DIIs, fall in the COVID-related cases, amid rise in vaccination, and continued thrust on reforms by the government to increase CAPEX.  

Investors are advised to remain long on markets, and increase exposure in sectoral leaders, suggest experts. Those who are waiting for a deep cut may have to wait but consolidation in markets could be seen in the near future.

Life has been rosy for the Indian markets with the Nifty crossing 18,000 levels in the span of just over a month of crossing the previous milestone.

“Current valuations of the benchmark index are on the higher side compared to the mean P/E and hence the pace of the bulls could witness some bumps going forward. Additionally, other emerging countries have observed dips in their benchmark indices and this divergence with India will eventually close out,” Yesha Shah, Head of Equity Research, Samco Securities, said.
 

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“The key harbingers of future growth could be rising inflation, hike in interest rates and sub-par GDP numbers. Although the outlook for the next 12 months is positive for India given the PLI initiatives, infrastructure pipeline, electricity reforms and other regulatory aid, investors should continue holding companies which provide the highest growth in fundamentals,” says Shah.

Shah further added that sticking with the leaders will also give a safety cushion to the investors in case of any strain due to inflation and interest rate hikes.

Among sectors that could take the next leg of the rally would be IT, Chemicals, consumption as well as banks, highlighted experts.

“While we remain positive on sectors like IT and Chemicals, we believe that sectors like consumer discretionary, BFSI and Capital goods will lead the next leg of the rally in the markets,” Jyoti Roy - DVP- Equity Strategist, Angel One Ltd, said.

We have collated a list of 10 stocks from various experts to buy this festive season for the long term:

Expert: Jyoti Roy - DVP- Equity Strategist, Angel One Ltd.

Federal Bank:

Federal Bank had posted a good set of numbers for Q1FY22 despite the second Covid wave as NII/ PPOP increased by 9.4%/21.8% YoY.

GNPA and NNPA ratio deteriorated marginally to 3.5 per cent and 1.23 per cent while restructuring went up by 0.79 per cent QoQ to 1.83 per cent of advances. Overall asset quality held up well in Q1FY22 despite the second Covid wave.

Moreover, the company has reported a 3.4 per cent QoQ growth in AUM for Q2FY2022 which indicates strong business momentum.

We expect the bank to report strong growth in AUM and improvement in asset quality from Q2FY22 which will drive NII and profit growth.

We expect the Federal bank to post NII/PPOP/PAT growth of 22.8%/23.7%/23.2% between FY20-23 and remain positive on the bank. We have a BUY rating on Federal Bank with a price target of Rs. 110.

Ashok Leyland:

Ashok Leyland Ltd (ALL) is one of the leading players in Indian CV industry with a 32 per cent market share in the M&HCV segment. The company also has a strong presence in the fast-growing LCV segment.

Demand for M&HCV was adversely impacted post peeking out due to multiple factors including changes in axel norms, increase in prices due to implementation of BS 6 norms followed by a sharp drop in demand due to the ongoing Covid-19 crisis.

M&HCV segment has also started to recover over the past few months before the 2nd lockdown while demand for buses is expected to remain muted due to a greater preference for personal transportation.

We believe that the company is ideally placed to capture the growth revival in the CV segment and will be the biggest beneficiary of the Government’s voluntary scrappage policy and hence rate the stock a BUY with a price target of Rs. 175.

Sona BLW Precision:

Sona BLW is one of India’s leading automotive technology companies that derive 40 per cent of its revenues from Battery Electric Vehicles (BEV) and Hybrid Vehicles.

It supplies EV differential assemblies and gears, BSG systems and EV traction motors to global customers. 75 per cent of their income from the sale of goods in FY21 came from end-use in the overseas markets.

This global BEV segment has been fastest growing and is expected to maintain a high growth rate which is positive for Sona BLW.

The company’s capabilities have enabled them to gain market share across its products especially for products related to EV/BEV. They also have a strong market share ranging from 55-90% for differential gears for PV, CV, and tractor OEMs in India.

Given the traction in the BEV/Hybrid Vehicle space, we believe that Sona BLW will continue to command a higher multiple which is justified by 47 per cent earnings CAGR over FY21-24E. We have a BUY rating on the stock with a target price of Rs. 821.

Carborundum Universal:

Carborundum Universal (CUMI) is part of the Murugappa group and is a leading manufacturer of abrasives, industrial ceramics, refractories, and electro minerals (EMD) in India having application across diversified user industries.

The company is expected to benefit from improving demand scenarios across its end-user industries such as auto, auto components, engineering, basic metals, infrastructure, and power.

CUMI has shown good execution in Q1FY22 with a strong performance in Abrasives and EMD segments. Within Abrasive, the company is gaining market share (supply chain issues/preference for Indian suppliers) and should benefit from good end-user industry demand.

EMD performance is likely to sustain owing to strong pricing and Volumes (due to China+1 strategy of its customers). We remain positive on the future growth prospects of the company due to strong demand for its products and entry into new segments by the company. We have a BUY rating on the company with a target price of Rs. 1060.

Expert: Yesha Shah, Head of Equity Research, Samco Securities.

Computer Age Management Services (CAMS)

Computer Age Management Services popularly known as CAMS commands a leadership position with the highest market share of 70-72 per cent of total Mutual Fund AUM in a duopoly RTA market with only 1 other major player, KFin Technologies (formerly known as Karvy).

It has maintained its leadership position since 2005-06 and has outperformed MF Industry’s AUM growth by 3 per cent from Mar-14 to Mar-20.

With a strong and consistent financial track record of compounding sales and profit growth by 8 per cent and 13 per cent respectively over the last 10 years, CAMS has been an attractive opportunity for investors since listing in 2020.

It also rewards its shareholders which is visible from a robust average ROE & ROCE of around 36 per cent and 52 per cent respectively in the last 5 years.

Additionally, India has one of the lowest MF penetrations globally with an AUM-GDP ratio of 12 per cent vs world average of 65 per cent, this itself offers long-term growth potential for the overall MF and RTA industry. After a healthy correction, the stock is ready for a healthy up move.

Infosys:

Infosys Ltd is one of the leading IT players catering to various sectors including BFSI, retail, communication and manufacturing.  It has been compounding its sales by 14 per cent over the last decade and has also maintained a handsome ROE of 25% over the same time period.

It has been gaining market share predominantly in the digital segment and will continue to do so due to the strong order book with significant growth opportunities across industries.

It has also been evidencing strong traction in cloud adoption aided by its cloud platform - Cobalt.

While the increasing sub-contracting, hiring, and retention charges led due to high attrition can put some pressure on its margins, the tailwinds from the overall industry dynamics and better revenue visibility give us confidence in its business. All these factors make this stock a strong investment candidate for the long term.

HDFC Ltd

India’s largest mortgage lender in the current environment remains one of the best real estate proxy plays in India. The company has surprised the market with nearly stable asset quality performance during a period when other rivals in the housing and asset financing sectors reported a large spike in stressed loans.

It has cemented its position with access to low-cost funds, a solid ALM position, and comfortable leverage. Sufficient balance-sheet provisioning also provides a cushion from any negative effect on the asset quality.

HDFC is well-positioned to acquire a profitable market share as demand for home loans continues to remain buoyant. Disbursements have also picked up the pace with nationwide unlocking.

In addition to this, the industry is in a sweet spot with interest rates at historical lows, robust housing demand and improving collection efficiency. The stock remains one of the best picks in NBFC space and we remain positive for an upside of 16% on this stock.

Expert: Binod Modi, Head Strategy at Reliance Securities

UltraTech Cement

UltraTech Cement – which enjoys ~21% market share on a pan-India level with a dominant presence across regions – is on the firm footing to cash in on the secular consumption opportunity for cement.

While UTCEM has sufficiently built capacity to outpace the industry’s growth in the next couple of years, it continued to focus on setting up maximum capacity in demand-rich regions. Expansion plans (19.5mnT) are moving as per the schedule and are to be commissioned by FY23.

We believe Improvement in the balance sheet despite new capacity addition is likely to result in improvement in RoCE, which makes a case for multiple re-rating.  

Ramkrishna Forging:

We believe the company will continue to win more new orders in the auto and non-auto segments over the coming years on the back of the launch of new products and an expanding overseas reach.

We expect RMKF’s volume to clock 27% CAGR over FY21-FY24E. Further, we expect a strong CV upcycle over the next 1-2 years, domestically as well as globally.

Moreover, its new margin territory coupled with healthy order wins across segments and geographies will support its rerating. Currently, the stock trades at 10.6x FY24E earnings, which is attractive given the robust OCF yield and return ratio.

Gujarat Gas:

While stock witnessed selling pressure in the last couple of weeks due to higher gas prices, we continue to remain optimistic about the company.

With increasing focus on gas over other alternate fuels and relative price advantage of gas over alternate fuels, we remain confident of 16 per cent volume CAGR over FY21-FY24E.

GUJGA still maintains PNG industrial prices at discount to LPG/propane, which mitigates the chances of the PNG industrial customer switching to alternate fuels. The stock currently trades at 18.2x FY24E earnings, which looks attractive.

Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.