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Nifty is seen to touch 20,936; which stocks to buy and sell?

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A host of factors will play a key role in the performance of the Nifty 50 going forward, one of the major positives may be the festival season. (MINT_PRINT)

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In their October 2022 report, analysts Amnish Aggarwal and Anushka Chhajed of Prabhudas Lilladher said, “Indian markets are currently experiencing a rollercoaster ride as global headwinds continue to drive strong domestic fundamentals. push inflation to a 15-20 year high in most developed markets. Consequently, the hawkish stance of the FED and other central banks should push interest rates even higher in the coming quarters. The GAS shortage and rising interest rates are likely to impact demand with growing fears of a recession in the US and Europe.”

This week on Friday, Nifty 50 closed at 17,314.65 down 17.15 points or 0.1%. However, overall over the week, the benchmark index rose by more than 3%.

Although there has been a significant correction in the commodity prices of crude, metals, palm oil and various agricultural products, Prabhudas Lilladher analysts do not rule out intermittent surges in the coming months. .

“We expect the global macro-economic situation to remain unstable in the next 3-6 months unless there is an end to the war between Russia and Ukraine,” the leaders added. analysts.

In terms of monetary policy, the RBI raised the repo rate for the fourth consecutive month by a cumulative 190 basis points. Currently, the policy repo rate is at 5.9%. The rate hike is in line with US rates. However, the spread between 10-year Treasury bills in India and the United States fell to its lowest level in 13 years.

The analysts’ note from the brokerage said, “We believe that slowing global growth and volatility may cause further downward pressure on INR in the coming months. should inflation slow in a few quarters (currently above the upper bound), we are cautious in the face of the same global headwinds and liquidity pressures.”

A festive season to set the course for robust growth in the second half of the current fiscal year.

“Our channel checks suggest strong demand during the normal first festival season after 2 years. We believe a strong festival season will pave the way for strong growth in 2H,” the note added.

According to the note, analysts continue to believe that the story structurally led by 1) IT services with strong global demand 2) expected gains from China+1 supply chain realignment in pharmaceuticals, chemicals, textiles, etc 3) the increasing visibility of CAPEX through ublic Infra (Rs1400 billion), PSU, PLI (Rs220 billion), Defense, Digitization and Data Centers.

Thus, Prabhudas’ note said, “We expect the current state of volatility to be temporary and recommend hoarding fundamentally strong stocks for medium to long-term gains.”

Setting a base target of 20,936 for Nifty 50, the analyst note said: “We estimate NIFTY EPS at 855.2 and 963.4 and introduce FY25 EPS at 1069.2. This shows growth of 12, 1/12.7/11.0% for FY23/24/25 Our estimates are 3.5% and 5.6% and 8.3% lower than consensus EPS estimates NIFTY is currently trading at 19x the 1-year forward PE, a discount of 7.8% from a 10-year average of 20.5.

Therefore, in their baseline objective, the analysts note, “we value NIFTY at the latest 10-year average PE of 20.5x on September 24 EPS of Rs 1,016, and arrive at the September 23 NIFTY target of Rs 20,936 (20057 earlier).”

It should be noted that the Nifty 50 also has the potential to hit the 22,918 mark. The brokerage firm raised its target in the bullish case, adding, “We value Nifty at a 10% premium to the PE 10-year average (21.5x) and assign a target of 22,918. (22,063 earlier).”

But in the bearish case, Prabhudas Lilladher priced Nifty 50 at a 20% discount to the 10-year average and arrived at a target of 15800 (16046 earlier).

Where to invest in the stock market?

Bank stocks:

Prabhudas Lilladher analysts are overweight banking stocks. The note read: “We remain overweight banks by 220bps (310bps earlier) on multi-higher credit growth and an expected increase in the NIM in the higher interest rate scenario. We are maintaining an overweight in all frontline banks like HDFC, ICICI, Kotak, SBI, and Axis Bank. We are slightly changing our weights in KMB and SBI by 50bps and 20bps.”

HFCs/NBFCs:

Stock brokerage is underweight in this basket.

The note adds: “We remain underweight NBFC. We are reducing the weight on HDFC by 70 basis points but increasing the weight on BAF by 20 basis points. a bank at some stage.”

Health care:

An overweight trajectory has been established in this sector. In the report, the analysts said: “We are maintaining an overweight in healthcare and increasing the weighting in Cipla by 20 basis points on improving growth prospects for US inhalers, Revlimid linked to the upside. We remain structurally positive on major hospital chains, given increasing incidence of insurance and health awareness.”

IT services:

Giving an overweight outlook on the segment, the note states that “we are maintaining an overweight (260 basis points) in IT even though we are reducing the weightings by 100 basis points. Data analytics, digital, artificial intelligence, supply chain, etc. We believe that near-term margin pressures are transitory and do not expect a significant impact on the growth trajectory of Indian IT majors due to the expected recession/downturn in the US.

Automotive:

Analysts have maintained a 220 basis point overweight in autos as they expect the current cyclical recovery to last for the next 2-3 years.

“We believe positives such as the easing of the semiconductor problem, lower commodity prices and strong pent-up demand are positives. The recovery in entry-level segments may further push

Growth rates. However, we believe that players with the most exposure to the United States and Europe could underperform in the short term,” the note added.

Consumer:

Analysts are underweight here by 300 basis points as the recent rise has discounted expected commodity price benefits

a correction has been priced in even though volume growth remains subdued in commodities.

The analysts’ note said: “Discretionary segments are faring better given strong pent-up demand in QSRs, apparel, travel, etc. We continue to favor consumer discretionary stocks over commodities over the past 2 -3 next periods.”

Capital goods :

They have increased the overweight in this sector to 360 basis points and expect the sector to experience strong growth over the next 3-5 years.

In addition to frontline stocks, the note says, “we expect a significant gain in consumables stocks in this universe. We retain L&T, Siemens and ABB in our model portfolio.”

Oil and Gas:

Prabhudas analysts maintained an underweight in oil and gas and kept the allocation to Reliance only in this universe.

Telecom:

The brokerage firm has included Bharti Airtel in its model portfolio, playing a structural role on the growing use of data in Ecom, Infotainment, etc. and expects sustained growth in the years to come.

Disclaimer: The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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