Private banks, IT stocks dominate Jefferies’ 19-stock India model portfolio

Mumbai: Jefferies’ India model portfolio is heavily loaded with private banks and IT companies and insurers, and the brokerage believes it is a ‘buy on dips’ market.

After a 57 per cent rally from the March lows, Nifty has shed 4 per cent in last three days.

“…we believe it’s a buy-on-dips market. This constructive view is predicated on continued global liquidity (hence depressed risk-free rate, justifying valuations) and encouraging economic recovery trend,” Jefferies analysts Mahesh Nandurkar and Anubhav Sinha said in a note on Tuesday.

They said among their key sectoral calls, they were overweight property and underweight staples, and their top picks included Housing Development Finance Corp (HDFC), ICICI Prudential Life, Godrej Properties, Infosys, ITC, Maruti Suzuki, Bharat Forge and Container Corporation of India (Concor).

Their model portfolio consists of 19 stocks. They are:

HDFC: Jefferies believes the country’s largest home-loan provider HDFC should be a beneficiary of the brokerage’s housing theme. It has a buy rating on the stock with a target price of Rs 2,210.

ICICI Bank: The analysts pointed out that the leading private, corporate lender ICICI Bank had relatively low stress and good capital buffers. The brokerage has a buy rating and a target price of Rs 480 on the stock.

HDFC Bank: Jefferies said leading retail lender HDFC Bank is growing its quality book well despite Covid challenges. It has a buy rating and a target price of Rs 1,350 on the stock.

IndusInd Bank: The brokerage likes private lender IndusInd Bank, and believes low valuations provide an entry opportunity. It has a buy rating and a target price of Rs 760 on the stock.

ICICI Lombard: Also on the list is ICICI Lombard, leading non-life insurance provider in a structural growth business with low penetration in key categories such as health. Jefferies assumed coverage on the stock on September 14, with a buy rating and price target of Rs 1,570 as it sees it as a key beneficiary of rising penetration that is one-fourth of global.

ICICI Prudential
Life: Jefferies believes ICICI Prudential, is among the largest life insurers that are expected to benefit from industry under-penetration. It likes the stock for uptick in profitability, low guarantees and attractive valuations, and has a buy rating with a target price of Rs 560.

Infosys: The analysts believe Infosys, the second-largest IT services company is well-poised to benefit from the surge in digital spending post Covid. They have a buy rating and target price of Rs 1,140.

HCL Technologies: Jefferies is upbeat on HCL Technologies on the back of rising growth momentum as indicated in the mid-quarter update. It has a buy rating and a target price of Rs 835.

TCS: TCS, India’s largest IT services company, is also on the list on the back of strong capabilities in the digital segment. The target price on the stock is pegged at Rs 2,580, and the stock is rated a buy.

Bharti Airtel: Jefferies said the second-largest telecom operator Bharti Airtel is benefiting from market consolidation and rising average revenue per user (ARPUs). Assuming doubling of Bharti Airtel’s ARPUs over FY20-25, in line with the sector, and a further 3-5 per cent annual tariff hike beyond FY25, the company’s fair value could range between Rs 840-Rs1,110 by March 2023, the brokerage said in June. It has a target price of Rs 660 on the stock, with a buy rating.

ITC: Jefferies likes ITC, the cigarette major with a growing FMCG business on the back of improving capital utilisation and attractive valuations. It has a buy rating and a target price of Rs 265.

Godrej Consumer Products: Jefferies pointed out that a recent change in top management has made growth the key focus for the Godrej Consumer Products’ portfolio. In August, it upgraded the stock to buy from hold, with a target price of Rs 820.

Maruti Suzuki: The analysts believe Maruti Suzuki, the country’s largest car maker is well placed to benefit from an upturn in the auto cycle and shift to personal mobility. They have a buy rating and a target price of Rs 7,150 on the stock.

Titan: Jefferies believes Titan is benefitting from the ongoing shift to organized businesses and a gold cycle on an uptick. The brokerage has a hold rating on the stock with a target price of Rs 1,150.

Eicher Motors: Jefferies likes the strong brand and premium product portfolio of Eicher Motors and pointed that it is a key beneficiary of two-wheelers personal mobility shift. It finds Eicher well-placed to benefit from a potential demand revival given its strong franchise, aggressive product pipeline and big dealer expansion. It has a buy rating with a target price of Rs 25,000.

Crompton Greaves Consumer Electricals: Jefferies said Crompton Greaves’ strong positioning in existing consumer durable categories, can see upsides from new category expansion and rising organization. It initiated coverage on the stock with a buy rating on September 8, and set a target price of Rs 340.

Bharat Forge: The analysts believe Bharat Forge is well positioned to play the cyclical upswing in industrials, both in India and globally. They have a buy rating on the stock, with a target price of Rs 535.1

Concor: Jefferies believes strong volume growth, backed by key infrastructure project completion, raises visibility on long term growth for Concor. Potential privatisation is an added trigger. It has a buy rating on the stock with a target price of Rs 525.

Kajaria Ceramics: The brokerage expects Kajaria Ceramics to be a beneficiary of rising sector organization and a shift to make in India. It has a buy rating on the stock, with a target price of Rs 550.

Godrej Properties: Jefferies pointed out that Godrej Properties, the largest-listed residential developer is benefiting from rising sector consolidation and a play on the brokerage’s residential cycle theme. It has a buy rating on the stock with a target price of Rs 1,040.

9 stocks that analysts say can offer solid returns in 2-3 weeks

Money-making ideas

The domestic equity market saw a massive selloff on Monday. Analysts believe that the market could see more disruptions going forward and recommend adopting a stock-specific approach. Nifty is likely to face resistance at higher levels and we could see some volatile move or mild disruption in the markets. The financial stocks are showing very weak relative strength and may underperform the broader market. We recommend staying highly stock specific in approach,” said Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services.

Here are 9 stock ideas that analysts say can offer solid returns over the next 2-3 weeks:

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