Benchmark BSE Sensex and NSE Nifty equity indices are expected to deliver double-digit returns in fiscal 2022 despite lingering concerns over geopolitical tensions, rising inflation, high crude oil prices, monetary tightening central banks and supply issues. Going forward, analysts believe that returns will depend on companies’ earnings potential.
Cyclical sectors such as financials and autos propelled more than 1% upside in benchmarks on Wednesday as investors cheered de-escalation talks between Russia and Ukraine. Investor confidence was boosted following talks between Russian and Ukrainian officials in Turkey, during which the Russian Deputy Defense Minister claimed that Moscow had decided to “dramatically” reduce its military activities near the capital Ukrainian. five large-cap stocks for a period of one year:
HDFC Bank |TP: Rs 1859 | Upside down – 26.24%
HDFC Bank is the largest private sector bank in India with a loan portfolio of Rs 12 lakh crore as of H2FY2022 and a deposit base of Rs 14 lakh crore. The Bank has a very well-distributed portfolio, with wholesale making up about 54% of the asset portfolio, while retail makes up the remaining 46% of the loan portfolio. The Q3FY2022 figures were in line with expectations, with the GNPA/NNPA cutting 9/3 basis points QoQ to 1.26% and 0.37% advances. Restructured advances at the end of the quarter amounted to 1.37% of advances. The bank recorded NII/PPOP/PAT growth of 13.0%/10.5%/18.1% for the quarter on the back of strong loan growth of 17.5% year-on-year. NIMs for the quarter were flat sequentially at 4.1%.
Management maintained that there will be a maximum impact of 10 to 20 basis points on the asset quality of the restructured pool. Given best-in-class asset quality and the expected rebound in growth from FY23, we believe the bank has given reasonable valuations at 2.8xFY23 accounting adjusted, which is below averages historical. We have a buy call on HDFC Bank with a target price of Rs 1859
Infosys | PT: Rs 2205 | Up: 15.59%
Infosys also reported strong completed deals, which as of Q3FY22 stood at $2.53 billion, with the deal pipeline at the highest level in a long time. Management sounded positive and suggested the demand environment has been extremely strong, and also raised the FY22 dollar revenue growth forecast from 16.5-17.5% CC to 19 .5-20% YoY.
Given that the demand environment for the entire industry is resilient and expected to continue, Infosys is expected to be among the top performers in the large-cap space. We have a buy call on Infosys with a target price of Rs 2205.
Divi Laboratories | PT: Rs 5200 | Increase: 14.14%
Divi Labs reported a very strong set of numbers for the third quarter of fiscal 2022, Molnupiravir sales help the company achieve sales growth. We believe divis will be the preferred player for the china+1 theme for API and CRAMS. Over the long term, we expect double-digit sales growth and improved margins through backward integration and debottlenecking. We expect Divis to be among the top performers in the pharmaceutical industry. We have a buy with a target price of Rs 5200.
ICICI Bank | PT: Rs 900 | Up: 23.28%
ICICI Bank is the second largest private sector bank in India with a loan portfolio of Rs 7.6 lakh crore as of H2FY2022 and a deposit base of Rs 9.8 lakh crore. The Bank has a very well distributed portfolio, with individuals representing 68.3% of loan portfolios, followed by corporates and SMEs at 22.9% and 4% of the loan portfolio. The Q2FY2022 numbers were better than expected, with GNPA/NNPA down 33/17bps QoQ to 4.82% and 1.0% ahead. Advances restructured at the end of the quarter represented 1.3% of advances. The bank recorded NII/PPOP/PAT growth of 24.8%/20.0%/29.6% for the quarter on the back of strong loan growth of 17.2% year-on-year. NIMs for the quarter also declined to 4.1%.
ICICI Bank has seen a turnaround in its operations over the past few years and asset quality issues are now behind the bank. At current levels, adjusted for subsidiary valuations, the bank is trading at a P/ABV of 2.4xFY23 Adj. a portfolio that we believe offers value given the improvement in RoE from 12% in FY2020 to 16% in FY23E, which would be in line with the best in the industry.
Oberoi Realty |TP: Rs 1250| Up: 33.83%
Oberoi Realty is a real estate company, focusing on the MMR region. The company has residential and commercial real estate business tops. The company released a strong set of numbers in Q2FY22, we expect the residential real estate growth momentum to continue over the next two quarters as in Q3FY22 the company launched Elysian Tower B in Goregaon with the upcoming launch of Thane. Diverse Revenue Mix – The company owns Oberoi Mall (0.5 msf), Commerz (1.1 msf) and West Hotel (269 room keys). We expect occupancy levels to improve in CY2022. Robust Launch Pipeline – The company plans to launch the Thane residential project in Q4FY22 with this Borivali project.
Consolidation in Real Estate – We have seen good consolidation across India towards the top 10 players. The top 10 players now hold a market share of 11.2%, up from 5.4% in 2017. We believe the top 10 players will continue to gain market share.
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