7 large-cap stocks to beat the market post-Budget

The stock of India's biggest private lender HDFC Bank has been the talk of the Street after its October-December quarter (Q3FY24) financials disappointed investors due to a decadal fall in its earnings per share (EPS), margin strain, and sluggish deposits. HDFC Bank shares have crashed 12 percent since it posted Q3 results. However, market experts say that the long-term growth story of the index heavyweight remains intact amid reasonable valuations.

Currently, HDFC Bank trades at 2.4-2.5 times (x) price-to-book (PB) multiple, as against historical averages of 4x PB value.

Prashant Jain, Director at 3P Investment Managers told Moneycontrol that HDFC Bank was one of his top holdings in the banking space. "We think that betting on an index heavyweight with strong growth prospects and reasonable valuations makes sense. The correction or de-rating does not mean that the essence of HDFC Bank has changed, it still holds a strong franchise and merger synergies would help the lender compete in a large mortgage market as well," he said.

State Bank of India | CMP: Rs 648.15

India's largest lender State Bank of India gained over 1 percent on February 1 after Finance Minister Nirmala Sitharaman spelled out lower borrowing plan for FY25 at Rs 14.1 lakh crore, down from Rs 15.1 lakh crore in FY24. This triggered yields to cool off by 8 bps and bolstered PSU banking stocks. Apart from that, market experts feel that PSU banking stocks are undervalued in the current expensive market.

"We believe that several stocks in the banking space have plenty of room for run-up due to their inexpensive price multiples," said Prashant Jain of 3P Investment Managers.

Analysts at Phillip Capital pegged SBI's loan growth to gain momentum in the October-December quarter (Q3FY24) as system-wide credit growth picks up. Net interest margins (NIMs), too, is expected to remain stable sequentially to 3.27 percent in Q3FY24, they added.

Reliance Industries | CMP: Rs 2,920.95

Nifty heavyweight Reliance Industries has always been a popular safe bet for investors in a volatile market. Recently, Reliance Industries (RIL) shares scaled an all-time high of Rs 2,917 per share on January 30, 2024, as foreign funds took refuge in stock to hedge their short positions on the index

In the latest update, Disney has reportedly reached a deal to sell 60 percent of its India business to Viacom-18 at $3.9 billion valuation. Viacom-18 is owned by RIL. Nilesh Shah, Founder & CEO of Envision Capital told CNBC-TV18 that RIL offers the best opportunity to investors at current levels.

RIL reported a 3.8 percent year-on-year (YoY) rise in consolidated revenue in Q3FY24, while EBITDA registered a growth of 16.7 percent YoY.

Maruti Suzuki | CMP: Rs 10,571.40

Maruti Suzuki stock surged more than 4 percent on February 1 after robust Q3 numbers, garnering bullish calls from several brokerages. HSBC has issued a 'buy' call on the counter with a target price of Rs 12,500 apiece. "The company's margins should improve with better operating leverage and few discounts", the brokerage firm said. Morgan Stanley is also bullish on the stock with an 'overweight' call and a target price of Rs 11,228.

According to Motilal Oswal, stable growth in domestic PVs, the success of new SUV launches, and increasing CNG penetration should drive better volume growth for Maruti. "We expect a recovery in both market share and margins in FY25, led by an improvement in supplies, a healthy mix, and operating leverage," it said. Axis Securities, Prabhudas Lilladher also have 'buy' call on the stock.

BNP Paribas has assigned 'Outperform rating on the counter. "Modest consensus margin expectations and depressed valuations make Maruti Suzuki an attractive positive surprise candidate," it said. So far this year, Maruti shares have jumped pver 3 percent, outperforming benchmark Nifty 50 which has fallen marginally during this period.

Bharti Airtel | CMP: Rs 1,126.35

The stock has seen a significant upswing in the recent time, rising over 31 percent in the last 6 months, compared to an 11 percent rise seen in Nifty 50.

BofA Securities recently upgraded the stock to “Neutral” and raised the target price to Rs 1,145 on expectations of a tariff hike. BofA Securities analysts expect a “meaningful tariff hike” in the next 12 months and expect Bharti Airtel to benefit. "The capex cycle pick-up is expected as Bharti's capex is based on improving handset penetration. We expect faster market share shift towards Bharti and Jio as 5G rollout scales up," it said.

Jefferies has also lifted the target price on the stock to 1,300 apiece, maintaining a 'buy' rating. Domestic brokerage Axis Capital has initiated 'BUY' rating on the counter with a target price of Rs 1,303 a share as believe that the stable competitive environment supports hikes.

While HSBC has downgraded the stock to 'Hold', it also raised target price on Bharti Airtel to Rs 1,125 from Rs 1,020 a share earlier. Analysts at HSBC said that Bharti Airtel's growth drivers remain intact, and the brokerage expects a rise in average revenue per user (ARPU) and market share gains in mobile. However, they expect the growth in non-mobile and capex intensity to decline. The brokerage also sees pricing in benefits from mobile tariff hikes and lower capex intensity.

However, HSBC said that the stock of the telecom services provider appears to be fairly valued. BoFA, despite its bullish call, also finds the stock expensive. "The stock's valuations are not cheap at 9.4x FY25 proportionate EV/EBITDA," the brokerage firm said.

Sun Pharma | CMP: Rs 1,454.40

The stock has seen a rally of 24 percent in the last months, outperforming benchmark Nity 50 which has risen 11 percent during this time. Several brokerages have chosen Sun Pharma as one of its top picks in the large-cap space, given its stable performance, consistent growth, and expansion of its specialty portfolio.

Prabhudas Lilladher has a 'buy' rating on the stock with a target price of Rs 1,640. The brokerage noted that over the last few years, the pharma major's dependency on US generics has reduced and the company’s growth is more functional on specialty, rest of the world, and domestic pharma business that has strong growth visibility. Furthermore, the acquisition of Concert Pharma along with the progress of other pipelines provides visibility to its specialty pipeline beyond FY25.

BNP Paribas maintains 'Outperform' on Sun Pharma as itr believes that higher revenue contribution from domestic formulation and specialty products should drive sustainable revenue growth and improve the company’s margins. "In an environment where peers are riding on one-off opportunities, Sun Pharma' has a promising pipeline of specialty products under development," it said.

SBI Life Insurance Company | CMP: Rs 1,429.05

Analysts at Emkay Global Financial reiterated a 'buy' rating on SBI Life, with a target price of Rs 1,750 per share. SBI Life management expects to clock robust growth in the medium term, growing above the industry rate, and VNB margins to track at around 28 percent for FY24, depending on the product mix.

ICICI Securities, too, maintained a 'buy' on the stock, with a target price of Rs 1,750 per share. "On the basis of management guidance as well as product pipeline, the company is likely to show better margin resilience around 28 percent levels despite EOM regulations," the brokerage firm said.

In the past three months, the stock of SBI Life has gained 7 percent, as against 12 percent rise in the benchmark Sensex.

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