The market saw a strong run-up in FY17, with the Nifty rising nearly 19 percent (against 9 percent loss in FY16). The market also started FY18 with a fresh record high of 9,245.35, backed by consistent FII inflows on hope of policy continuity after BJP's landslide win in UP.
FIIs poured in nearly Rs 50,000 crore in Indian equities in the financial year gone by, which helped the Midcap gain 35 percent (outperformed Nifty smartly) even as the rupee gained past 65 against the US dollar.
Earnings recovery and normal monsoon would be the next key triggers for market, feel experts who expect it could drive the Nifty towards the five-digit mark (10,000).
Motilal Oswal says buoyancy post the recent state election results (Q4FY17 returns of 12 percent in Nifty is best since Q1FY15) and the government's push on reforms (GST implementation gathering pace) have already been factored in, which means that room for further expansion of P/E multiple is now limited.
"Realisation of anticipated earnings recovery, management commentary in the forthcoming Q4FY17 results, progress of monsoon and GST implementation will be key catalysts," it says.
While maintaining overweight call on India, Timothy Moe of Goldman Sachs says he expects the Nifty to reach 9,500 in 12 months and 10,200 by 2018-end as earnings recovery gathers pace driven by 12 percent and 15 percent profit growth this year and next.
Gautam Shah of JM Financial has positive targets for the Nifty going forward. He has set a near-term target of 9,500 for the Nifty in 4-6 weeks. "In the medium term, he sees the index touching 11,000 levels in 12-16 months," he told CNBC-TV18.
Hugh Young of Aberdeen Asset Management also says emerging markets are the best place to invest in the long-term but there are two major hurdles that the market could face – US Federal Reserve hikes interest rates, and the ensuing reversal of flows (back to developed markets).
Here are stocks recommendations from HDFC Securities that could give you more than 25 percent returns:-
Dr Lal PathLabs: Buy recommendation; target Rs 1,090-1,235
The brokerage house has initiated on Dr Lal PathLabs, a leading player in the fragmented & competitive Indian diagnostics market, with a buy recommendation with a target price of Rs 1,235. It sees Dr Lal to be key beneficiary on the shift toward the organised space.
The company has posted 21 percent revenue and 30 percent profit CAGR over FY13-16. HDFC Securities expect the momentum to continue with the next 2-3 years and forecast 21 percent revenue CAGR over FY16-19 led by growth from across the board.
A strong brand franchisee, stellar return ratios in the range of 30-35 percent, robust balance sheet and free cash flows justify premium valuations. The company's secular growth story and superior return metrics make a compelling long-term story, the brokerage house says.
Trent: Buy recommendation; target Rs 305-350
HDFC Securities has a buy recommendation on the stock. It advises adding the stock on decline at Rs 235 for targets of Rs 305-350 over the next 3-4 quarters.
Favourable Indian demographics, GST's favourable impact on whole industry, company's expansion strategy and continuously increasing walk-ins & average bill size puts Trent in a sweet spot. Moreover, recent big listing of D-Mart (one of its competitors) shows huge potential of the retail industry and this has led to re-rating of retail sector.
The research house believes Trent deserves higher multiples as it is a Tata Group Company with stable financials, a strong balance sheet as well as strong brand pedigree.
Shakti Pumps: Buy on declines recommendation; target Rs 231.5-259.5
Shakti Pumps, one of the largest submersible and stainless steel pump manufacturers in the country, is known for its products that are of superior quality and the energy efficiency that it provides.
Post implementation of GST, bridging tax differential with the unorganised sector should further accelerate the topline growth for organised players like Shakti Pumps, the brokerage house says.
Solar pumps is a large opportunity which will benefit Shakti Pumps by way of higher tender sales to state governments and sales to original equipment manufacturers/contractors. Shakti Pumps has no capex plans in the near future and repayment of debt should lower its leverage ratios.
HDFC Securities feels investors could buy the stock and add on dips to Rs 174-178 band for sequential targets of Rs 231.5 and Rs 259.5 in 2-3 quarters.
MCX: Buy on declines recommendation; target Rs 1,505
The brokerage house expects MCX, which engaged in facilitating trading, clearing and settlement of commodity derivatives, to post robust 41 percent EBITDA (earnings before interest, tax, depreciation and amortisation) CAGR driven by revenue CAGR of 25 percent and EBITDA margin expansion (48 percent in FY19 against 32.6 percent in FY16) over FY16-19.
Considering the asset-light nature of the business, HDFC Securities expects return on equity to expand to 15 percent in FY19 against 9 percent in FY16.
MCX had a decent run-up after the hike in transaction charges and regulatory approvals (options trading). The research house still sees significant value in MCX considering its strong business franchise, recent top-level management rationalisation, favourable regulatory environment and long-term growth prospects.
Since the stock has run up a lot, HDFC Securities recommends investors to buy MCX on declines to Rs 1,080-1,150 with target price of Rs 1,505.
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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.
Posted by Sunil Shankar Matkar
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