Amidst a highly volatile last month that witnessed notably mixed performance across sectors, market caps, and style indices. The previous month turned out to be a rather eventful month, primarily on account of a surge in volatility, as higher inflation print in the US market and aggressive rate hike expectation by the US Federal Reserve resulted in weaker economic cues across the globe. Furthermore, the RBI, too, surprised the market with a 40bps Repo Rate hike in an unscheduled MPC meeting, accentuating the negative sentiment.
Axis Securities in a note commenting on how the markets are expected to perform in June, said “the market is currently eyeing the central banks’ guidance on the interest rates trajectory. The RBI’s MPC meeting is scheduled this week and the policy action will decide the direction of the market over the near term."
Nishit Master, Portfolio Manager, Axis Securities, said: “Investors should spread their investments across time frames (systematic investment) and stocks (diversification in at least 12-15 stocks) during these volatile periods. Investors should also carefully weigh the risk-reward probabilities for any stock based on all foreseeable variables for the stock before finalizing any stock to be bought."
Axis Securities has picked a few stocks that they believe can deliver up to 56 per cent returns. The June basket includes ICICI Bank, Bajaj Auto, Tech Mahindra, Maruti Suzuki India, State Bank of India, Bharti Airtel, Cipla, Federal Bank, Varun Beverages, Ashok Leyland, Astral Ltd (India), Bata India, APL Apollo Tubes, HealthCare Global Enterprises, Praj Industries, CCL Products (India).
A few of these stocks from the June basket are listed below:
ICICI Bank has been outperforming its peers and has been ticking most boxes on growth, margins and asset quality. Higher loan growth, improving operating profits, and a strong provision buffer coupled with a strong deposit franchise will help the bank achieve ROAE/ROAA expansion over FY23-24E. “On the valuation front, we believe the bank continues to be on a comfortable footing. We maintain a BUY on the stock with a revised target price of Rs1,000/share (SOTP basis core book at 2.8x FY24E and Rs 173 Subsidiary value)," Axis Securities said.
Tech Mahindra is India’s leading IT services provider to many business conglomerates. We believe Tech Mahindra has a superior services mix and multiple long-term contracts that are well-spread across the verticals, reducing its dependency on any one vertical. Furthermore, we foresee healthy tractions in Communications and Enterprise verticals which will greatly accelerate the company’s revenue growth moving forward. “We recommend a BUY rating on the stock and assign a 20x P/E multiple to the company’s FY24E earnings of Rs 83.7/share to arrive at a TP of Rs 1,700/share. TP implies an upside of 44 per cent from CMP," the brokerage firm said.
MSIL could emerge as the biggest beneficiary of demand recovery in the post-COVID period, considering its stronghold in the Entry-Level segment and a favourable product lifecycle. New launches, targeted at filling the gaps in its portfolio, are likely to improve the overall product mix. The company would gain further market share, driven by an expected shift towards petrol & CNG vehicles. Going forward, we expect new product launches to resume with a mix of product upgrades and new model launches. “We expect the company’s volumes to witness a strong growth CAGR of 16 per cent over FY22- 24E. We have a BUY rating on the stock with a TP of Rs 9,800 valuing the stock at 27x its FY24E EPS, implying an upside of 27 per cent from CMP," firm said.
State Bank of India
Amongst the PSU banks, SBI remains the best play on the gradual recovery of the Indian economy on account of its healthy PCR, robust capitalization, a strong liability franchise, and an improved asset quality outlook. We believe normalization in credit costs and improved growth outlook should lead to double-digit ROEs of ~14-15 per cent over FY23-24E. In this backdrop, we maintain a BUY rating on the stock with a revised target price of Rs 665/share (SOTP basis core book at 1.3x FY24E and subsidiaries at Rs 185)
Bharti Airtel is one of the largest telecom companies in the world with operations spanning 18 countries and a subscriber base of more than 420 Mn. We recommend a BUY rating on the company with SOTP based valuation at Rs 900/share aided by superior margins, stronger subscriber growth, and higher 4G conversions.
Cipla One India Rx business has expanded EBITDA margins by ~500bps over FY17-FY22E, led by its continued efforts on digital platforms, field force productivity, and stringent control over the costs. The buildout of the respiratory portfolio would drive strong operating leverage in the US business which along with a sustained high single-digit growth in the India business and further cost optimisation would expand the company’s RoIC by ~200bps to ~18% over FY21-FY24E.
CCL Products (CCLP) was incorporated in 1994 as an Export Oriented company engaged in the manufacture of Instant Coffee globally. CCL Products is one of our high conviction BUY with a revised TP of Rs 560/share (Rs 585/share earlier), as we continue to value it at a target P/E multiple of 23x its FY24E EPS.