The large cap stocks that Prabhudas Lilladher mentions as its conviction picks are: Ambuja Cement, Bharti Airtel, Bharat Electronics, HDFC Asset Management Company, ICICI Bank, IndusInd Bank, InterGlobe Aviation, Larsen & Toubro, Max Healthcare Institute, Mahindra & Mahindra, Reliance Industries and Titan.
The domestic brokerage firm has conviction on the following mid and smallcap stocks: BEML, Crompton Greaves Consumer Electricals, Cyient, J.B. Chemicals & Pharmaceuticals, Jindal Stainless, Lemon Tree Hotels, R R Kabel and Safari Industries (India).
PL Capital believes that the market and Street estimates have already priced in a strong demand rebound during the upcoming festival and wedding seasons and any disappointment in demand during this period could lead to further downward revisions in EPS estimates.
“The market has shifted in favour of defensive sectors as the valuations in many cyclicals have become quite expensive, even after accounting for sustained growth. With expectations of higher growth and lower risk, sectors like FMCG, IT Services, Pharma, and Consumer Durables have experienced a strong rebound. The return variation between large-cap and mid-cap indices has narrowed significantly over the past three months,” said the PL Capital report.
The difference in returns between large cap and small cap indices is now less than 1% for the three-month period, though the gap remains substantial over the six- and twelve-month periods.Also read: Waaree Energies fixes price band for Rs 4,321 crore IPO; GMP soars 85%Capital Goods, Infrastructure, Ports, EMS, Hospitals, Tourism, New Energy, E-commerce, and Telecom are emerging sectors to watch out for, provided they are available at the right valuations, suggests Prabhudas Lilladher.
The report also states that a strong EBIDTA growth is expected to continue in the Hospitals, Pharma, Capital Goods, and Chemicals sectors, with Auto, Banks, and Durables also likely to post double-digit growth. Rural demand for staples is showing signs of recovery, though Q2 results may reflect some impact from prolonged rains.
Additionally, the discretionary spending has remained positive in areas like travel, housing, jewellery, and two-wheelers, while passenger vehicles (PV), quick-service restaurants (QSR), apparel, footwear, and building materials are still facing challenges.
Sectors such as Auto, Capital Goods, Pharma, and Hospitals are likely to report robust margin expansion, whereas Building Materials, Consumers, Media, Oil & Gas, and Cement are expected to see a decline in margins.
However, in a bull case scenario, PL Capital has stated that Nifty could trade at a 10% discount to its long-term average, with a target of 25,080.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
