Spending theme would be dominant on the bourses in the new year, with finance and auto ancilliaries stocks on the forefront
Brokerages are hoping that Samvat 2073 that begins on Sunday would turn out to be better than the current one on account of low inflation, falling interest rates, bountiful monsoon among others.
Going by the Diwali stockpicks of five brokerages, consumption theme would be dominant on the bourses in the new year, with finance and auto ancilliaries stocks on the forefront.
Motilal Oswal has chosen three financial sector firms — HDFC Bank, LIC Housing Finance, Shriram City Union Finance — as part of top five picks, while Centrum Wealth Management is recommending ICICI Prudential Life Insurance Co and Karur Vysya Bank. Angel Broking finds Axis Bank, Dewan Housing and Equitas Holdings lucrative.
While LIC Hosing Finance is expected to sustain 2%+ incremental spreads and Shriram City Union Finance is tapping the potential of small enterprises, according to Motilal Oswal Investment Services.
The broking houses also see earnings pacing up from the second quarter.
“Indian equities seem to be on a cusp of new growth trajectory. Though the market stands at a gain of over 25% from CY16 lows, the valuations are around 10-year average on 12-month forward earnings multiple. Valuations look attractive as we expect Sensex earnings per share to grow at 17% compounded annual growth rate over FY16-18,” writes Motilal Oswal.
For a target price of Rs 116, Geojit BNP Paribas is recommending Ashok Leyland and it sees Axis Bank trading at a premium over its five-year mean valuation.
According to Angel Broking, Dewan Housing is expected to post a healthy loan book CAGR of 21% over FY2015-18E. The brokerage is also betting on robust order book-to-sales position of Amara Raja Batteries, which is expected to grow at a CAGR of 18% over the next two years.
While growth prospects of ICICI Prudential Life Insurance are positive, Karur Vysya Bank is changing asset mix to position as SME-focused bank with improving asset quality of Rs 237 crore in Q1 and 675 crore in Q4FY16, Centrum says.
“We expect the government to focus on effective implementation of fiscal reforms already passed. GST is likely to be implemented from April 2017. Inflation has come off over the past few months, and we believe it will continue to trend lower.We expect returns in Samvat 2073 to be better than Samvat 2072, notwithstanding the intermittent bouts of corrections/profit-booking,” Kotak Securities said.
“Most companies are expected to post growth in their earnings and sectors like automobile, cement etc will benefit the most from this revival,” as per Angel Broking.
Interestingly, Tata stocks, which have taken the market by storm, are not in any brokerages’ list.
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