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Analysts suggest these 8 large-cap stocks to buy at this juncture, do you own any?

In these uncertain times, when markets are volatile as the country grapples with the frightening rise in COVID-19 infections, experts say investors should go for quality large-cap stocks and use any near-term correction to pick up such shares.

April 20, 2021 / 02:04 PM IST
 
 
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The Indian market has been volatile of late because of the dangerous spurt in COVID-19 infections, particularly in major cities and industrialised states.

Market benchmark Nifty fell 7 percent below from its February peak of 15,431.75, as the relentless and rapid surge in the COVID-19 cases has dented investor sentiment.

Strict restrictions in many states to break the chain of infection has hit earnings expectations and hopes of strong economic growth although the liberal vaccination policy, which allows all citizens to take the jab for a price, has calmed nerves.

"The health crisis India is going through, and localised lockdowns and restrictions on economic activity warrant a market correction. The targets of around 11 percent GDP growth and above 30 percent earnings growth for FY22 that the market had assumed pre-second wave are likely to fall short," VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Experts believe benchmark indices may remain in a narrow range until June 2021 with profit-booking on every rise.

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"The level of 14,250 is a strong support for Nifty below which, it can head towards 13,800 if the situation worsens. However, long-term trend for the markets remains positive," Nirali Shah, Head of Equity Research, Samco Securities, said.

Experts say that when the market develops cold feet and the outlook is hazy, it is advisable to stick to quality stocks, especially large-caps due to their wider market share.

"As Nifty looks to consolidate, participants should trade stock-specific with proper risk management in place. Long-term investors can start adding quality stocks to their portfolio on major dips," Shah said.

Binod Modi, Head Strategy at Reliance Securities said any near-term possible correction in the market should be treated as an opportunity of bargain trading.

"Investors must focus on quality stocks with robust earnings visibility and margins of safety," Modi said.

Based on the recommendations of various analysts, here are eight large-cap stocks that can give up to 32 percent return in one year. Take a look:

Recommendations by Siddharth Sedani, Vice President - Equity Advisory, Anand Rathi Shares and Stock Brokers

Hero MotoCorp | LTP: Rs 2,889 | Target price: Rs 3,653 | Upside: 26%

As several parts of the country gradually reopened in recent months, the company’s sequential monthly sales have recovered.

The two-wheeler industry in enjoying high demand because of the combination of social-distancing norms and inadequate public transport.

The company is currently operating at nearly 100 percent production capacity.

With improvement in demand and improving macro-economic data especially from rural areas, the analyst expect the two-wheeler industry to bounce back faster, bringing medium-term gains for market leader Hero MotoCorp.

HPCL | LTP: Rs 235.40 | Target price: Rs 293 | Upside: 24%

HPCL has about 25 percent market share in India among public sector companies and strong marketing infrastructure.

The oil refining and marketing company has the second-largest market share in product pipelines in India with more than 3,370 km for transportation of petroleum products.

Its focus on operational efficiency and cost optimization is expected to boost profits.

It has significantly invested in the expansion and upgrade of refineries and supply chain infrastructure with the highest ever capital expenditure of over Rs 15,000 crore in FY20.

HPCL is doubling its existing capacity in both refineries which will drive the earnings for its refinery business. It will also benefit from higher throughput and GRM in FY22/23 along with a stable marketing margin.

Dr. Reddy's Laboratories | LTP: Rs 4,883 | Target price: Rs 6,012 | Upside: 23%

In Q3 FY21, the company's revenue came in at Rs 4,930 crore, up 12 percent YoY driven by growth in all the divisions.

The company's EBITDA margins were steady at 24 percent but profit has hit by a trigger-based impairment charge taken on a few acquired products including Nuvaring.

Revenue from the global generic segment at Rs 4,080 crore was up 13 percent YoY, primarily driven by new product launches and integration of the acquired portfolio from Wockhardt in India. However, the volume growth in the base business was largely offset by price erosion.

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Recommendations by Ashis Biswas, Head of Research at CapitalVia Global Research

Infosys | LTP: Rs 1,348.10 | Target price: Rs 1,710 | Stop loss: Rs 1,304 | Upside: 27%

Technically, with the breakout above Rs 1,400, the stock is set to gain momentum.

Infosys is expanding its lead over the competition in handling clients' cloud journeys and assisting in big deal wins. It enjoys a differentiator in cloud migration roadmaps and managing data, processes, and applications in the cloud.

IT services can gain value from promoting seamless integrations while retaining hybrid cloud models after the cloud migration process is completed.

Connected systems on the cloud will produce massive amounts of data, and data analytics and AI-driven automation will be the following big growth engines.

The cloud, cybersecurity market, and data analytics drive Infosys' digital portfolio to rise at an annual pace of 30 percent in FY21.

Digital revenue now accounts for half of total revenue, and it will continue to expand rapidly at the cost of core legacy revenue.

The analyst expects the company's digital business to expand and generate higher margins than its average of 24 percent.

Wipro | LTP: Rs 469.45 | Target price: Rs 525 | Stop loss: Rs 399 | Upside: 12%

Technically the stock has seen a strong uptrend since it bottomed out during March 2020.

Recently a breakout from a short-term price pattern that resembles a flag pattern was observed.

Technically a breakout above Rs 420 will ensure the price pattern to complete. In such an instance, we expect a resumption of the stock's ongoing uptrend.

The largest acquisition made by Wipro in its history with Capco, a London-based BFSI management and technology consulting company, for $1.45 billion in cash (approximately 2 times 2020 revenue). The transaction will be completed in the second quarter of 2021.

With this acquisition, Wipro will join a select group of IT service providers who can give customers an integrated, end-to-end consultative digital, cloud, and IoT transformation solution at scale.

The company's largest sector globally is the BFSI market, a high priority and development segment.

Although there may be a growth spurt in FY22 following a slight fall in FY21 (lower than expected), organic sales growth in FY23 is only slightly lower than FY22.

Cipla | LTP: Rs 940.10 | Target price: Rs 1,240 | Stop loss: Rs 740 | Upside: 32%

The stock has broken its 52-week high recently. It has picked up momentum since then, and we have observed momentum indicators like MACD and RSI, indicating that the momentum in the stock is likely to continue.

In the future, the company intends to launch combination inhalers in larger markets in the United States and Europe and establish its front ends to drive development.

While the EU and API are still small, they are expected to rise as inhaler sales increase and biosimilars contribute to EMs in FY23.

Cipla has grasped the gap generated by Perrigo's withdrawal, as evidenced by: (a) 12 percent market share in the $1 billion market; (b) interchangeability is evident, as Proventil and generics hold 13 percent of the market post generics (previously 4 percent); and (c) limited competition and confusion over Perrigo's entry should ensure Cipla generates $110 million in FY22, with room for growth.

Although growth will slow in FY22 due to COVID-19 supplies, the base business is expected to remain stable as core therapies perform well, said the analyst.

Asian Paints | LTP: Rs 2,654 | Target price: Rs 3,140 | Stop loss: Rs 2,450 | Upside: 18%

A double bottom pattern appears in its daily chart around Rs 2,400. Asian Paints is trading in an upward trending channel. It has crossed 40 DMA in March 2021, and traded above it since then, which indicates a positive outlook on the stock.

The company is the market leader in its segment, with a market share of nearly 53 percent. Demand conditions continue to exhibit strong recovery across business segments, spread over most regions in the third quarter of the financial year.

The decorative domestic business delivered a powerful performance with more than 30 percent volume growth, led by a substantial premium and luxury portfolio performance.

Hindustan Unilever | LTP: Rs 2,453.95 | Target price: Rs 3,070 | Stop loss: Rs 2,225 | Upside: 25%

The stock is currently moving in an uptrend channel. It has been trading above 40EMA, indicating a positive outlook on the stock.

The analyst expects the stock’s momentum to continue as it has bounced back from the support of around Rs 2,400.

"We have witnessed the overall recovery in the Sector, led by smaller urban centers. Over the past three months, the metro and modern trade center sales have witnessed an upward trend. We expect the company's EBITDA margins to improve YoY from both a standalone and consolidated basis," the analyst said.

The inclusion of the GSKCH business is positive for the company. Earnings growth has gained momentum in recent years (nearly 12 percent CAGR over the last 10 years).

HUL demonstrated capabilities of implementing cost-saving plans based on best-of-breed analytics and execution. Introduction of herbals range of product is key factors that will drive the earning growth.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Nishant Kumar
first published: Apr 20, 2021 02:04 pm

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