Earnings growth for FY20 will get better by H2FY20 led by positive lag-effect of reforms,” says Vinod Nair, Head Of Research at Geojit Financial Services
The December quarter earnings have not been blockbuster, but they have not been as bad as was earlier estimated. This has led to some tailwinds for Indian market even as global cues remain slightly muted.
For markets to sustain any breakout, earnings will play a big role, suggest experts. Although there are fears of a global slowdown, most experts feel India should outperform.
"Unless we head towards a global recession, a deceleration in global GDP growth would not necessarily cause a reversal in a market direction at home. On the contrary, India’s growth rate at over 7 percent would look even more attractive to investors, when compared to a slowing globe," Amar Ambani, President & Head of Research, YES Securities told Moneycontrol.
India will be marked as the world’s fastest-growing major economy while the global economy is forecast to slow, the International Monetary Fund said. India’s GDP is forecast to expand 7.5 percent in FY20 and 7.7 percent in FY21. China’s growth is seen at 6.2 percent in both years.
The global economy is projected to grow 3.5 percent in 2019 and 3.6 percent in 2020, 0.2 and 0.1 percentage points below last October’s projections.
“Cleary India is even outperforming today and given positive vibes led by structural reforms to perform in the long term. Earnings growth for FY20 will get better by H2FY20 led by positive lag-effect of reforms (like GST, IBC, NPA restructure), then the subdued growth of the last three years due to the disruptive effect of a bunch of reforms,” Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.
“India’s fiscal position is much better today, while a long-term negative view on oil prices will have a further impetus on the country’s macro situation. Food inflation has been brought under control by the government led by reforms and measures in the rural economy. This will lead to lower consumer inflation improving RBI’s stance from ‘calibrated tightening’ to ‘positive’, leading to an interest rate cut in the future."
Here is a list of six stocks in which brokerage firms raised their 12-month target price post-December quarter results and can give 12-30 percent return:
Asian Paints: Upgraded to Outperform| Raised target to Rs 1,580| Upside: 12 percent
Macquarie upgraded Asian Paints to outperform rating post-December quarter results and also raised its 12-month target price to Rs 1,580 from Rs 1,180 earlier.
Volume growth has picked up significantly, and the volume growth outlook has also improved which is a positive sign.
The recent price increases with falling input costs will improve margins, said the Macquarie note. The global investment bank also raised FY19-21 EPS estimates by 7-16 percent. The full effect of lower GST rates yet to play out, added the note.
HDFC Bank: Buy| LTP: Rs 2,134| Target: Rs 2,530| Upside: 18 percent
Edelweiss marinated its buy rating on HDFC Bank post-December quarter results and raised its 12-month target price to Rs 2,530 from Rs 2,454 earlier.
The core operating performance remains strong, but the asset quality slipped a little bit. The GNPL rose to 1.38 percent, and slippages rose 2.1 percent in December quarter largely impacted by agri segment.
Due to challenges in the operating environment, Edelweiss expects a flight to safety in favour of private banks, it said in a note.
SBI Life Insurance: Buy| LTP: Rs 618| Target: Rs 760| Upside: 23 percent
Citigroup maintained its buy rating on SBI Life Insurance post-December quarter results but raised its 12-month target price to Rs 760 from Rs 700 earlier.
The company showcased a strong December show. It recorded strong protection growth. Improving productivity of bancassurance and agency channel should sustain growth, said the note. SBI Life made MTM provision for investment depreciation which could reverse.
L&T Infotech: Buy| LTP: Rs 1,781| Target: Rs 2,100| Return: 18 percent
Citigroup maintained its buy rating on L&T Infotech post December quarter results and raised its 12-month target to Rs 2,100 from Rs 2,045 earlier.
The company reported a strong December quarter, and it remains the top mid-cap pick for Citigroup. EBIT margin rose due to an increase in offshore mix and better utilisation.
Premium valuations are likely to sustain given strong visibility and good execution.
Zee Entertainment: Outperform| LTP: Rs 425| Target: 564| Upside: 32 percent
Macquarie maintained an outperform rating on ZEE Entertainment post December quarter results and raised its target price to Rs 564 from Rs 556 earlier.
The December quarter addressed investor concerns on margins and progress of ZEE5. The global investment bank strongly believes that Zee is among the most attractive media assets in emerging markets.
Apollo Hospitals: Buy| LTP: Rs 1,295| Target: Rs 1,600| Return: 23 percent
HSBC maintained its buy rating on Apollo Hospitals post December quarter results and also raised its 12-month target price to Rs 1,600 from Rs 1,275 earlier.
The global investment bank sees a better operating margin trend for its hospital's biz with improving profitability. New hospital momentum likely helped 3QFY19. The outlook remained intact on improving mix and operating leverage.Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.