Market benchmarks the Sensex and the Nifty took a breather on September 24 after logging strong gains in the last two sessions.
While some consolidation was expected as the market is trading near peak valuations, analysts are of the view that it will offer fresh buying opportunities.
"The consolidation is healthy for the larger uptrend and will provide fresh buying opportunities. The consolidation, once matured, will make way for the next leg of the rally,” said Gaurav Ratnaparkhi, Senior Technical Analyst at Sharekhan by BNP Paribas.
The market will take cues from the upcoming September quarter earnings and the Reserve Bank of India's monetary policy outcome on October 4.
"From medium to long-term perspective, the outcome of the RBI monetary policy and revival in corporate earnings will be crucial, as it is likely to dictate the trend in the market," said Ajit Mishra, Vice President - Research, Religare Broking.
Moreover, there is speculation that the government may announce more measures to support the economy.
Keeping these in mind, market experts and brokerages suggest going for those stocks which look attractive and are backed by fundamental as well as technical factors.
Here are 10 stocks that brokerages think can give healthy returns in the one-year horizon:
Brokerage name: Angel Broking
Maruti Suzuki | Buy | Target price: Rs 7,783
Maruti Suzuki continues to hold nearly 52 percent market share in the passenger vehicles.
The launch of exciting models has helped the company to ride on the premiumisation wave that is happening in the country.
In the last two years, the company has seen improvement in the business mix, with the pie of the utility vehicles.
"The company is well placed to capture any revival in the industry due to overall refreshment of the portfolio (already more than 50 percent of portfolio launched based on BS-VI compliance like Alto, Wagon, Baleno, Dzire, Swift," said the brokerage.
Mahindra & Mahindra | Buy | Target price: Rs 724
The Indian company operates in nine segments: automotive, farm equipment, IT services, financial services, steel trading and processing, infrastructure, hospitality, Systech and Others (logistics, aftermarket, two-wheelers and investment).
The Met department has predicted a near-normal monsoon for 2019 for the third consecutive year, which will help tractor sales.
The brokerage thinks healthy growth in tractor industry would benefit M&M the most due to strong brand recall and leadership position in farm tractors.
"We expect M&M to report healthy top-line and bottom-line growth over the long period mainly due to healthy growth in automobile segments like Utility Vehicles (on the back of new launches and facelift of some models) and healthy growth in tractors segment, driven by strong brand recall and improvement in rural sentiment," said the brokerage.
Jindal Steel & Power (JSPL) | Buy | Target price: Rs 250
As per the brokerage, the company's crude steel capacity has more than doubled in the last five years, from 3.6 MTPA to 8.6 MTPA, and is currently running at nearly 65 percent utilisation.
Continuous demand for steel from infrastructure, housing and auto sectors along with limited addition of steel capacity in the near-term and favourable government policies augur well for JSPL.
The brokerage expects JSPL’s utilisation to improve to 80-85 percent by FY20 along with the reduction in debt led by improving profitability.
"JSPL is trading at an attractive valuation to its peer, we value the stock based on an asset-based approach of steel segment on EV/Tone basis and power segment on EV/MW basis," said the brokerage.
TTK Prestige | Buy | Target price: Rs 6,638
TTK Prestige is the leading brand in kitchen appliances with more than 40 percent market share in the organised market. The company has launched an economy range – ‘Judge Cookware’–to capture the untapped demand, especially at the bottom end of the pyramid.
"It expects to double its revenue in the next five years backed by the revival in consumption demand, inorganic expansion and traction in exports," Angel Broking said.
Aurobindo Pharma | Buy | Target price: Rs 890
The company has acquired dermatology and oral solids businesses from Sandoz Inc, USA. With this acquisition, Aurobindo adds sales of $0.9 billion and would become the second-largest generics player in the US by a number of prescriptions.
Aurobindo has a robust pipeline (has filed 519 ANDA’s; second highest among Indian companies) and is investing to enhance its foray into complex generic (mainly injectables, ophthalmic etc) and biosimilar, which will drive its next leg of growth.
"We expect Aurobindo to report net revenue CAGR of about 22 percent and net profit to grow at about 19 percent CAGR during FY2018-20E, aided by acquisitions. Valuations of the company are cheap against its peers and own fair multiples of 17-18 times," said Angel Broking.
Shriram Transport Finance | Buy | Target price: Rs 1,385
The brokerage expects the company's AUM to grow at CAGR of 13 percent over FY2019-21, led by pick up in construction, macro revival and ramping up in rural distribution.
Q1FY19 onwards asset quality started witnessing steady improvement, and the brokerage expects this trend to continue.
"We expect Shriram Transport to report RoA and RoE to 2.7 percent and 17.6 percent in FY20 and FY21, respectively," said the brokerage.
Brokerage name: Anand Rathi Shares and Stock Brokers
ICICI Lombard General Insurance Company (ICICIGI) | Buy | Target price: Rs 1,450
During FY19, the company issued 2.65 crore policies, up 12.8 percent from FY18. The gross direct premium income (GDPI) increased 17.2 percent year on year(YoY) to Rs 14,488 crore, while profit after tax (PAT) grew 21.8 percent YoY to Rs 1,049 crore.
In terms of GDPI growth, the management expects the industry and the company to grow in the range of 15 percent to 20 percent in preferred segments on a medium to long-term horizon.
"ICICIGI’s improved risk selection, conservative reserving and disciplined underwriting practice have helped in the prudent management of combined ratio," the brokerage said.
"In terms of the macro scenario, the domestic non-life industry has plenty upside. Current low penetration levels (0.93 percent as against global average of 2.80 percent, low density, premium per person of $18 compared to world average of $297), rapid urbanisation, young Indian population, increasing disposable income and rising awareness of risk protection will continue to be the demand drivers in the sector."
ICICI Bank | Buy | Target price: Rs 511
ICICI Bank is strongly positioned in most of the retail banking products along with the diversified nature of its loan portfolio. This has allowed the bank to register strong advances growth of about 11 percent CAGR in the past four years with asset quality staying under control.
As per the brokerage, the management has given the guidance that credit costs in FY20 would be significantly lower than FY19. Specifically, the management stated that credit costs would be in the range of 1.2-1.3 percent during the year.
Considering the strong brand franchise, improving asset quality trends and strategy focus, the bank is well poised to deliver consistently with improving return ratios.
"We expect the company to grow its standalone NII at a CAGR of 17 percent over the next two financial years. Healthy advances growth and cross-sell opportunities in the existing high-quality deposit franchise will help in delivering strong NII going forward," said the brokerage.
On the profitability front, the brokerage expects the company to report standalone PAT CAGR of 111 percent over the next two financial years. Lower credit cost along with healthy advances and NII growth will help in delivering strong profitability.
Deepak Nitrite | Buy | Target price: Rs 346
Deepak Nitrite (DNL) is one of the leading global players for several niche chemical products like xylidines, cumidines, oximes and colour intermediates. It caters to several industries, including colorants, petrochemicals, agrochemicals, rubber, pharmaceuticals, paper, textile, detergents, fine and specialty chemicals, etc.
Deepak Nitrite has reported a growth of 31 percent in its standalone revenues. The performance was mainly driven by healthy momentum in the performance products segment, which reported strong volume as well as realisation gains.
"We have considered current financials of the company and continue to remain positive on the stock," said the brokerage.
HDFC Bank | Buy | Target price: Rs 1,410
HDFC Bank reported a net interest income growth of 22.9 percent in Q1FY20, driven by asset growth and a core net interest margin of 4.3 percent. Provisions stayed a tad higher at 38.3 percent QoQ. Earnings growth continues to stay healthy at 21 percent YoY.
The bank has made contingent provisions of Rs 165 crore and Rs 86 crore towards NBFC and HFCs, respectively. Overall asset quality marginally deteriorated with GNPA ratio at 1.40 percent, up 4 bps QoQ.
The bank has said it has been trying to push for deposit mobilisation and hence, has been steadily increasing deposits to support loan-book growth.
As per the brokerage, adjusting for the cash management-related inflows, which are outside of the deposit accounts and the long-term institutional funding, the credit-deposit ratio comes down to 75 percent.
"Considering the strong positioning, healthy balance sheet growth and superior asset quality and management, we believe the bank is well poised to deliver consistently with margin leadership and robust return ratios. We continue to remain positive on the company over medium to longer-term perspective and maintain our buy rating on the stock with a target price of Rs 1,410 per share," said the brokerage.(Disclaimer: The views and investment tips expressed by brokerages 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.)