Valuations are not exactly as cheap as they were a few months back but stock specific trades, if played right, could help boost your returns. Ahead of this year’s Muhurat trade, benchmark indices Sensex and Nifty are trading near their all-time highs. Although the stock market sentiment is bullish, aided by Pfizer’s coronavirus vaccine and the US Presidential election results, it is still imperative that investors tread cautiously. Valuations are not exactly as cheap as they were a few months back but stock specific trades, if played right, could help boost your returns. Amid this, brokerage and research firm Religare Broking has narrowed it down to six stocks that they are recommending investors to buy this Diwali.
Ashok Leyland
Upside potential – 24%
Ashok Leyland could be the best play on a recovery in the commercial vehicle space. The company is the second-largest CV manufacturer in India and the fourth largest manufacturer of buses globally. “Over the last decade, Ashok Leyland has been steadily gaining market share in the domestic M&HCV segment and made its presence felt in the LCV segment from FY12. We expect volumes to recover led by revival in the CV industry as the company’s portfolio is more skewed towards high tonnage vehicles which would benefit more during upcycle in the CV industry,” said Religare Broking while pinning target price of Rs 105 per share on the stock.
Bharti Airtel
Upside potential – 58%
With 440 million customers across 18 countries, Bharti Airtel is a giant in the telecom space. The domestic telecom industry has witnessed intense competition in the last decade. Despite this, Bharti Airtel has managed to retain its spot in the market. “Going forward, we believe that the worst of the pricing war is behind us and the industry would collectively look to increase tariff at regular intervals,” Religare said in the note. With the AGR dues overhang now sidelined, Bharti Airtel remains a strong player in the telecom sector. Religare Broking has a target price of Rs 709 per share on Bharti Airtel.
Crompton Greaves Consumer Electrical
Upside potential – 20%
The manufacturer of a wide range of electrical consumer durable products ranging from fans, light sources and luminaires, pumps and household appliances such as geysers, mixer grinders, toasters and irons has a strong product portfolio to sustain its growth. “We expect Crompton to continue to strengthen its market share in the ECD segment both from unorganized as well as other players. Its strong product portfolio, new innovative product launches, strong brand presence would enable the company to achieve a higher market share in the ECD segment,” said Religare Broking while pinning a target price of Rs 370 per share on the stock.
ICICI Bank
Upside potential – 25%
The private sector lender is also on Religare’s diwali shopping list. Apart from the strong growth in the core banking segment of ICICI Bank, analysts at Religare broking are expecting momentum to come from subsidiaries as well. The two subsidiaries that Religare Broking is hopeful of are the insurance arm of ICICI Bank and the stock broking business. “ We would prefer investing in a large private banking space with ICICI bank as our preferred pick. The bank has a strong brand name, healthy capital and liquidity position, stable asset quality, a large customer base and improved corporate governance under new management,” they said. A target price of Rs 552 per share has been pinned on the stock.
Kansai Nerolac Paints
Upside potential – 20%
Backed by a strong parent firm in Japan’s Kansai Paint, the domestic firm has a strong product portfolio. Although the space might have taken a hit during the pandemic, however, with rising disposable income and increased rural spending Kansai Nerolac could see demand pickup soon. “Further with a reduction in GST to 18% from 28% has helped organised players to gain market share,” Religare Broking added. Reduced input costs would aid growth in margins. Religare has a target price of Rs 615 per share on Kansai Nerolac.
Larsen & Toubro
Upside potential – 23%
The engineering major has maintained the health of its order book which stands at Rs 2.9 lakh crore, providing strong revenue visibility. “Further, 82% of L&T’s domestic order book (+75% of the total order book) is from the public sector which mitigates credit risk to a large extent. Going forward, the overall project pipeline (domestic as well as international) is robust at Rs 6 lakh cr as there are a lot of opportunities in areas such as water, power transmission & distribution, metro, railways as well as roads & expressways,” Religare noted while adding a target price of Rs 1,181 apiece on L&T stocks.
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