After being positively surprised with September quarter and December quarter corporate earnings, investors got a reaffirmation that a broad-based recovery is underway.
Corporate earnings for Q3FY21 (December quarter) were better-than-expected in general. Positive management commentary across most companies was a further boost.
Aggregate sales and net profit of Nifty companies grew by 2.7 percent and 19 percent, respectively, making it one of the best quarterly earnings growth in the past five years, brokerage firm Sharekhan said in a note. Meanwhile, aggregate earnings of Sensex companies rose by 7.5 percent in Q3.
Consensus of earnings estimates for Nifty has gone up by 3.5-4% this quarter. Post the Q3 upgrades of the companies, Nifty is currently trading at about 21x/18x its FY22E/ FY23E (estimated) earnings, said the brokerage note.
Sharekhan further added that valuation multiples tend to be high in the early stages of an economic cycle. Moreover, earnings upgrades would support valuations.
Indian economy is showing signs of recovery post the knee-jerk halt in economic activities during lockdown imposed by the government to curb the
Sectorally, autos, capital goods, cement, consumer, consumer durables, private and PSU banks, healthcare, metals, oil and gas, retail, and technology reported beats on 3QFY21 PAT estimates. On the other hand, NBFC, staffing and utilities reported in-line earnings.
Experts are of the view that big opportunities will arise from the banking, infrastructure and industrial sectors that are likely to gain the most from Budget 2021, as well as from policies rolled out by the government in 2020 to support growth.
“BFSI has turned out to be a significant opportunity post results and the budget. Building materials and infrastructure are now seeing good traction,” Naveen Kulkarni, Chief Investment Officer, Axis Securities told Moneycontrol.
“Also, earnings visibility is improving for the industrials sector. This will gain traction in the forthcoming quarters,” he said.
Ashutosh Tiwari, Head of Research at Equirus Securities sees better growth in the manufacturing sector due to pick-up in infrastructure, construction, and CAPEX, and hence industries and companies benefitting from this trend will do better.
"We are more positive on companies from Capital goods, Industrial, Infrastructure, Metals, Financials, Auto and Consumer discretionary sectors," he said.
We have collated a list of largecap stocks from various brokerage firms that are part of their high conviction list post Q3 results:
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