Rajat Rajgarhia, Head-Research at Motilal Oswal Securities told CNBC-TV18, "One of the stocks that we have upgraded now after quite sometime is HDFC Bank. There is a special section that we have put on that stock and the sector where today at 14.5 times FY15 earnings the multiple the lowest in the last 11 years for this bank."
"A 25 percent earning compound annual growth rate (CAGR) is not just the best in the banking, but also the best in the Nifty basket that we are forecasting right now. We think that as you start seeing growth numbers becoming little better for the economy, this stock at least will deliver the earnings growth in form of stock returns," Rajgarhia said.
He further said, "If you see any rerating happening in the second half of this year for the market, this stock will participate. So the base case returns that we are looking for HDFC Bank is 25 percent and that is a phenomenal return to look into a large cap. So that is one name that we are very positive on now."
He further added, "The second name that we have articulated is Infosys and Tech Mahindra. While Infosys has rallied now, it again has a lot of catch up to do because a 16 PE in an earnings upgrade cycle is something which will become a buying reference point for investors. Two years back this stock was Rs 3,400-3,500, today it is back at that same price, but the EPS has moved from Rs 150 to likely Rs 230 in FY15. That is again another large cap name which will deliver good return."
"Third is Oil and Natural Gas Corporation (ONGC). Generally even if our bias for the PSUs have been lower in the portfolio as next one year will be the period of adjustment in earnings for ONGC and should also be an adjustment in the stock price even if you keep the valuation same for the stock," Rajgarhia said.
He further said, "I think the EBITDA growth momentum has started picking up for Bharti Airtel quite well now. Investors are now looking at the point when the reported profit numbers also started gaining pace in the range of Rs 1,000-1,500 crore, this could well be that quarter. Again this stock has lagged behind the performance of some of the other telecoms, so your valuations are favourable. I think pharma is an evergreen space. So these 4-5 large caps are the ones that should do very well in 2014 in our view."
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