Anand Rathi’s Largecap Favourites
Anand Rathi, a leading brokerage firm, has spotlighted its preferred large cap stocks: Dabur India, Havells India, Hero MotoCorp, ICICI Bank, LTIMindtree, and Ultratech Cement. The firm predicts that the Nifty 50 index could yield a return of 11-13% over the next 12 months, underlining the medium to long-term strength of the Indian stock market.
Outlook on the Indian Stock Market
Despite a positive forecast for smallcap stocks, Anand Rathi adopts a more cautious approach towards midcaps, favouring domestic-oriented companies over global cyclicals in light of ongoing global uncertainties.
“India stands out among emerging economies, with robust GDP growth, a promising fiscal outlook, and manageable inflation levels. Although industrial growth is currently facing short-term hurdles, the government’s infrastructure investments and increasing rural demand are providing essential support,” commented Sujan Hajra, Chief Economist & Executive Director at Anand Rathi Shares and Stock Brokers, in a strategy report.
Economic and Inflation Factors
India’s fiscal health appears encouraging, with a concerted effort to reduce the fiscal deficit towards the 4.5% target. Strong tax revenues and a significant dividend from the Reserve Bank of India (RBI) might lead to a fiscal deficit lower than anticipated, potentially resulting in an upgraded sovereign rating, according to the Anand Rathi report.
While inflation has moderated, the Consumer Price Index (CPI) is expected to increase in the coming months as the base effect wanes. Analysts at Anand Rathi do not foresee any interest rate cuts from the RBI this year.
Industrial growth has shown signs of moderation, but a recovery is expected in key sectors like cement and steel, driven by the government’s ambitious ₹11.1 lakh crore capital expenditure plans aimed at boosting infrastructure development. The report also highlights that the RBI’s recent data indicates a rise in capacity utilization from below 75% to 76.3%, suggesting a possible increase in private sector capital expenditure, which could benefit sectors reliant on order books.
Mixed Corporate Earnings
The June 2024 quarter’s corporate earnings reveal a mixed bag, with Nifty 50 sales growing by 7% year-on-year (YoY) and adjusted Profit After Tax (PAT) by 1.4%. However, the weak refining margins in the oil and gas sector have weighed down overall performance. Excluding oil and gas, Nifty 50’s PAT saw an 11.8% YoY increase.
“Sectors such as auto, healthcare, financials, and private banks have performed well, while cement and FMCG have remained subdued due to lower volumes and the diminishing impact of low-cost inventory. The oil & gas and metals sectors have significantly underperformed, primarily due to margin pressures,” the report notes.
Strategic Stock Picks
Anand Rathi has expressed a preference for domestic-oriented companies, particularly in sectors such as two-wheelers, passenger vehicles, consumer goods, IT, and cement (viewed as a proxy for infrastructure growth), over global cyclicals like metals and oil & gas. The firm maintains a neutral stance on infrastructure, financials, and chemicals, with a cautious approach towards midcaps.
Largecap Stock Picks:
The large-cap stocks favored by Anand Rathi include Dabur India, Havells India, Hero MotoCorp, ICICI Bank, LTIMindtree, and Ultratech Cement.
Smallcap and Midcap Stock Picks:
For small and mid-cap stocks, the firm favors Arvind Fashions, Ashok Leyland, Bharat Bijlee, Birla Corporation, Chalet Hotels, Cholamandalam Investment and Finance Company, Crompton Greaves Consumer Electricals, HG Infra Engineering, Rategain Travel Technologies, and United Breweries.
With a promising fiscal outlook and the potential for an 11-13% rise in the Nifty 50 index, the Indian stock market presents a robust investment opportunity, especially in large-cap stocks. Investors should consider these strategic picks by Anand Rathi to navigate the market effectively over the next 12 months.
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