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Apr 16, 2018 01:10 PM IST | Source: Moneycontrol.com

Top 30 stock ideas from Morgan Stanley, Citi amid heightened geopolitical volatility

In a bull case scenario, Morgan Stanley see the index touching 41,500 (bull case scenario), in the base case scenario it sees Sensex to touch 35,700, and in the bear case scenario, it sees Sensex slipping towards 25,000 by December 2018.

Kshitij Anand @kshanand

Volatility gripped markets across the globe after US President Donald Trump along with UK and France fired over 100 missiles on Syrian chemical establishments over the weekend.

Equity markets, in general, do not likely uncertainty and events like these usually trigger risk-off sentiment. Things could turn ugly for markets across the globe if Russia starts to retaliate. In this scenario, what should investors do?

Market experts said that Indian markets have always managed to surmount the wall of worries in the past and this time too it will be no different. The Nifty is trading above its crucial short and long-term moving averages. The Sensex did reclaim Mount 34,000 in April which suggests ongoing strength on D-Street.

Morgan Stanley in its report released earlier this month highlighted that Indian markets can outperform emerging markets (EMs). In a bull case scenario, the brokerage see the index touching 41,500. In a base case scenario, it sees Sensex touching 35,700, and in a bear case scenario, it sees the Sensex slipping towards 25,000 levels by December 2018.

“Returns are moderating in 2018, especially down the capitalisation curve. Largecap valuations look reasonable and better than midcaps. Hence, we remain more constructive on largecaps relative to midcaps,” it said.

Top 20 stocks in its focus list include Bajaj Auto, M&M, Maruti Suzuki, ITC, Bharat Financial, HDFC Bank, ICICI Bank, M&M Financial, ZEE Entertainment, IndusInd Bank, Dr Reddy’s Laboratories, Havells India, JSW Steel among others.

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Although most global brokerage firms did tweak their targets with respect to the Sensex and Nifty, there is general consensus that investors should focus on individual stocks.

Market experts said the focus will now shift to individual stocks in 2018 from benchmark indices. "The crucial factors will be earnings which will chart a direction for Indian markets in the near future."

The Indian market has digested a rise in rates, domestic political news, bank scandals, rise in equity supply, protectionist waves, global market volatility, rise in Fed rates, higher oil prices and a reduction in portfolio weightage by FPIs.

Another global brokerage, Citigroup expects a 10 percent YoY growth in Q4 earnings of stocks in its coverage universe, led by strength in commodities (oil & gas and steel) and domestic autos (excluding JLR).

“With FY18 likely to be another year of tepid earnings growth (single-digit growth expected), we would watch out for downgrade risks to our FY19 estimates. We expect 2018 to be a volatile year for Indian markets and have our December 2018 Sensex target to 35,700, factoring in downward earnings revisions,” it said.

Its top picks from the mid and largecap space include Apollo Hospitals, DB Corp, Emami, Exide Industries, Federal Bank, Gujarat State Petronet (GSPL), L&T Finance, Mahindra & Mahindra Financial Services, Petronet LNG and Voltas.

In the largecap space, it is positive on Ambuja Cements, Aurobindo Pharma, Bharat Electronics, Cipla, HDFC Bank, ICICI Bank, IndusInd Bank, M&M, Tata Motors, and IOC.

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Disclaimer: The views and investment tips expressed by investment experts 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.
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