The benchmark indices are up more than 4 percent so far in May as daily COVID cases fall, Indian companies post strong earnings, and foreign investors returned to local stocks.
Daily COVID cases, which were hovering above 400,000 at the beginning of the month, have halved now.
“Markets rallied on the back of better Q4FY21 earnings as well as supportive global cues. Besides, updates on the COVID-19 vaccine and peaking out of cases too are boosting sentiments,” Ajit Mishra, VP- Research, Religare Broking Ltd told Moneycontrol.
“Investors are expecting demand and growth to be on track for sectors least impacted by the pandemic, with a gradual unlocking in the coming months,” he said.
Vaccinations expected to gather pace in the coming months. Coupled with a fall in COVID cases, this has opened up the possibility of unlocking by different states from June. Some states have, however, warned that this would be a gradual process.
Be that as it may, some experts have suggested that it could be time to look at the stocks that will benefit from the unlocking. These are the 10 stocks they have handpicked for you.
Ajit Mishra, VP- Research, Religare Broking Ltd
In banking, we would bet on ICICI Bank/Axis Bank as they are well placed and have better financials, a strong balance sheet, and a large network that bodes well for growth. Besides, improving corporate governance and management’s long-term growth prospects are also positive.
In pharma, we like Natco Pharma as it is a strong player in the specialty business both in the domestic and US markets. The company is making efforts for new drug launches for COVID and cancer drugs, which bodes well for the growth.
Lastly, long-term growth prospects in terms of other new launches remain strong. Apart it has a strong balance sheet and decent financials, thus we are bullish on the stock.
Mahindra & Mahindra will benefit from the recovery in the tractor industry and a resilient rural economy. Further, the LCV business is also expected to do well on the back of increased adoption of the hub and spoke model.Indigo is the largest airline in India with a market share of around 54 percent. Passenger load factor will likely increase post lockdown as vaccinations gather pace and people are able to travel freely. Indigo’s plan to replace older CEO aircraft with NEO aircraft by Dec’22 would result in fuel savings of around 15 percent resulting in margin expansion.
PVR:
PVR is the largest operator of cinema screens in India. It has 175 cinemas with 835 screens across 71 cities having a seating capacity of 179K viewers. As lockdown restrictions get eased PVR will start operating its cinema halls with restricted capacity.
We believe that as people get fully vaccinated occupancy levels for cinema halls will increase gradually. During the last one year PVR has been able to keep costs down which has helped it stay afloat.
Also to reduce lease rentals, PVR has reached settlements with landlords for 88 percent of cinemas for complete or partial waiver/discounts for the lockdown period.
Indian Hotels Company Limited:
IHCL is India’s no 1 hospitality company. It has a portfolio of 200 domestic hotels and 17 international hotels. We expect tourism to witness a sharp recovery once people get fully vaccinated.
Given IHCL's strong parentage and brand visibility, we expect it to benefit most from improvement in tourism. In the last 1 year, IHCL has been able to cut fixed cost from Rs 163 crore/month to Rs 118 crore/month through prudent corporate restructuring, this has led to the savings of Rs 135 crore in FY21. We are bullish on IHCL and recommend to buy from a medium-term perspective.
Ankit Pareek, Research Analyst at Choice Broking.
Maruti Suzuki has a strong presence in the domestic car market. Its market leadership, a favourable demand, and easing of supply disruption will boost earnings.SBI Bank posted impressive Q4FY21 results which beat street expectations in such a challenging environment. SBI's improvement in asset quality is a key positive factor and the impact of COVID-19 is manageable.
United Spirits is India’s largest spirit player with a diversified product portfolio. The short-term movement restrictions have impacted the breweries & distilleries industry. However, United Spirits is our top pick in the liquor space as the demand-supply challenges are expected to be short-lived and recovery can be better than market expectations with unlocking.
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