Top five stocks according to Nomura are ICICI Bank, Axis Bank, L&T, Concor and State Bank of India
Nomura has set Nifty's FY20 target at 12,250 as favourable election outcome has led to the re-rating of market multiples, the global investment bank said in a note last week.
However, the current slowdown in economic growth and its impact on the near-term earnings limit the scope for the valuation multiples to move higher, at least in the near-term, it added.
Nomura continues to value the market at 16x one-year forward earnings to arrive at March 2020 Nifty target of 12,250. Its previous target for December 2019 was at 12,170.
In terms of portfolio changes, the global investment bank raised its weight in corporate banks and insurance companies. It has increased exposure in infrastructure companies but remains underweight on cement.
Nomura upgraded OMCs to overweight, but remained underweight on healthcare and downgraded auto to neutral.
A decisive mandate for BJP-led NDA is a key policy enabler that will accelerate infra spend momentum, Nomura said. This coupled with a stable macro environment and inexpensive valuations make capex-linked companies attractive, it added.
“Economic slowdown presents a near-term risk to earnings. However, we remain constructive on the earnings growth for the broader market from a medium-term perspective,” said the note.
What should we expect in terms of medium-term policy?
Well, a clear mandate for the BJP-led NDA alliance implies that the government policies have resulted in a political dividend. Hence, the new government is likely to continue with the existing policies, said the note.
There is likely to be continued focus on infrastructure development, schemes targeting the poor and rural India. Nomura expects an increased focus on agriculture during the NDA Government’s second tenure as the current government had stated its intention to double farm income by 2022.
On the macroeconomic policy, the government is likely to keep a tight leash on inflation and make efforts to meet its fiscal deficit target at least during the initial phase of its tenure.
“Active fiscal stimulus to revive economic growth may not be a priority. We expect the new government to address the liquidity concerns with NBFCs, which to an extent have adversely impacted economic growth,” said the note.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.The Great Diwali Discount!
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