Thinking where to invest or book profits? Here are top 5 tactical ideas by Morgan Stanley

Tata Consultancy Services: Underweight| Fall in price with 70-80% probability

Morgan Stanley expects the share price of TCS will fall relative to the country index or Nifty50 over the next 60 days. The global investment bank expects a muted performance in 1Q18 for TCS.

Management commentary has been constructive around demand in FY18, but we see limited signs of a pickup in spending from 1Q itself, based on commentary/guidance of peers. It expects constant currency revenue growth in 1Q18 to be slower than it was last year (1Q17), though cross currency tailwinds will help reported US$ growth.

Morgan Stanley estimates that EBIT margin will decline 160bps on a QoQ basis, leading to muted net income performance. At 17.8x F18e P/E, it sees a risk to the downside.

“We estimate that there is about a 70% to 80% (or "very likely") probability for the scenario. Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the scenario,” said the report.

Wipro: Equal-Weight| Fall in price with 70-80% probability

Morgan Stanley believes that the share price will fall relative to the country index or Nifty over the next 60 days. “We expect Wipro's IT services revenue performance in 1Q18 to be weaker than that of peers. IT services revenue guidance was US$1,915-1,955mn (-2% QoQ to flat QoQ),” said the report.

Adjusting for cross currency movements, the guidance implies growth of -1.1 percent on a QoQ basis to over 0.9 percent on a QoQ. We expect US$ growth of -0.2% QoQ.

The two key areas of concern are 1) the healthcare vertical, which has yet to show a positive turnaround (per Accenture commentary) and 2) the retail vertical (which could surprise negatively for Indian IT vendors, as highlighted in our global CIO survey).

At 15x F18e P/E, the global investment bank sees risk to the downside. “We estimate that there is about a 70% to 80% (or "very likely") probability for the scenario,” it said.

Godrej Properties: Equal-Weight| Fall in price with 70-80% probability

Morgan Stanley believes that the share price will fall in absolute terms over the next 60 days. This is because the stock has traded up recently, making short-term valuation much less compelling.

Godrej Properties is up 76 percent on a YTD basis (vs. 11% for the Sensex) making valuations appear rich, especially on earnings, as the stock is trading at 30.3x F19 EPS of Rs15.7 (MSe) and a 7% discount to March '18 NAV of Rs558/share.

The stock seems to be pricing in the strong brand name, good execution capability seen in Trees residential, Vikhroli land bank and potential JDA opportunities.

Legacy projects are taking longer to monetize and the balance sheet appears stretched at 1.71x net gearing. “We estimate that there is about an 80 percent (or "highly likely") probability for the scenario,” said the report.

Titan Company: Overweight| Price to rise with 80% probability

Morgan Stanley believes that the share price will rise relative to the country index over the next 30 days. This is because of raised forecasts/guidance. “We see an opportunity for over 2x returns on Titan stock over the next three years,” it said.

Morgan Stanley forecasts an acceleration in revenue growth, led by rapid market share gains, ahead of market expectations, after implementation of GST.

Titan remains our top pick. In our base case, we factor in a 22 percent jewellery revenue CAGR in F2017-20 and a 27 percent earnings CAGR – the key driver of a 2x stock return over the next three years.

“We are 8-20 percent above consensus for F2018-20 earnings estimates. We estimate that there is about an over 80 percent (or "highly likely") probability for the scenario,” it said.

ITC: Overweight| Price to rise with 80% probability

Morgan Stanley believes that the share price will rise relative to the country index over the next 30 days. The government has issued a notification clarifying that there will be no levy of any additional duty of excise on cigarettes, although there is still no clarity on the levy of National Calamity Contingent Duty (NCCD).

With NCCD levied at the existing rate, our calculations suggest a ~4 percent reduction in cigarette taxes and ~2 percent price flexibility for ITC.

“Without NCCD, we see a higher 7 percent reduction in cigarette taxes and ~3.5 percent price flexibility. We expect the stock to react positively to this development as clarity emerges over NCCD in the next few days,” said the note.

“We estimate that there is about an 80%+ (or "highly likely") probability for the scenario,” it said.

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