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As the year 2020 draws to a close and most people would be happy to see the back of 2020, but surely 2020 will be written in the history books for multiple reasons. Covid-19 will shape up businesses over the coming decade but it has also taught people a very valuable lesson that life is not be hoarded but to be lived. This means, risk taking will be coming back meaningfully and a stronger than expected economic revival is likely.

Axis securities top picks for the new year include -- Infosys, Bharti Airtel, Colgate, Relaxo Footwear, Amber Enterprises, Ujjivan Small Finance, Star Cement, Solara Active Pharma and Nocil. Here's why the brokerage recommends these stocks:

Infosys

CMP: 1,263, Target price: 1,404, 11% upside

  • Industry defining US $ 3.2 bn partnership
  • Resilient business, Healthy outlook
  • Growth drivers led by digital, large deals

Bharti Airtel

CMP: 511, Target price: 676, 32% upside

  • Demand for enterprise services to remain robust
  • Positioning as a digital company continues
  • Strong customer additions

Colgate

CMP: 1,573, Target price: 1,745, 11% upside

  • Focus on volume led profitable growth
  • Strategic approach towards innovation
  • Strong share gains in MT and e-commerce channels

Relaxo Footwear

CMP: 821, Target price: 925, 13% upside

  • Mass and value proposition the core
  • Healthy return ratios and balance sheet
  • Further Capex to drive growth

Amber Enterprises

CMP: 2,399, Target price: 2,800, 17% upside

  • Most backward integrated player in India and strategic plant locations
  • Strong traction in RAC demand
  • Increased localisation to aid business
  • Commercial AC segment foray
  • Planned capex to augur well with PLI on the cards

Ujjivan Small Finance

CMP: 40, Target price: 47, 19% upside

  • Diversified portfolio
  • Multiple levers to stabilize NIMs
  • Improving asset quality post COVID-19
  • ROA expansion visible

Star Cement

CMP: 103, Target price: 115, 11% upside

  • Capacity expansion to drive volume and revenue growth for the company
  • Strong market presence in its key market of North East & growing in East India
  • Integrated nature of operation with efficient cement plants
  • Healthy Financials to support future growth

Solara Active Pharma

CMP: 1,196, Target price: 1,350, 13% upside

  • India’ APIs Industry, dual source qualification and import substitution a structural tailwind
  • Strong Product Portfolio

Nocil

CMP: 147, Target price: 176, 19% upside

  • Improving volume and pricing trajectory
  • NOCIL well placed to capture share amid industry de-growth
  • New accelerator, an import substitution opportunity
  • Encouraging long term prospects

The brokerage's preferred key themes for 2021 are as below:

Digital, Healthcare and Telecom will continue to have a good run in 2021

All these themes were promising even before covid-19 but the pandemic has resulted in business transformation decisions which were unthinkable a year back. IT companies in India are winning big transformational deals which will have huge implications over the next few years. Similarly, healthcare and telecom sectors have seen massive changes. Business models are set to evolve further and stocks in these sectors will continue to outperform in 2021.

Year of small and mid caps

After a prolonged period of weakness, the small and mid cap stocks have outperformed the large cap indices by a significant margin. The year 2021 will be a year of economic revival with GDP growth rate closer to double digits. Notwithstanding the low base, the economic revival will usher stronger earnings growth. In a year of strong earnings growth, mid and small caps tend to see market beating earnings growth and rerating. Small and mid cap stocks are likely to deliver very strong returns and when combined with other dominant themes then returns will be even stronger.

BFSI and Atmanirbhar to see strong traction

The immense liquidity within banking system has meant that the sector is now focused on growth. NPAs are likely to be contained well and the banks have raised enough capital to tide over the stress challenges. As growth becomes the focus for banks, stock returns will track credit growth and pre provision profits which are likely to be significant. Apart from BFSI, the Union Budget for 2021 will be very critical with major schemes for manufacturing companies expected. This could mean a wide range of Atmanirbhar (self-sufficiency) schemes are in the fray. This could help the manufacturing sector immensely.

Sector rotation and impetus on infrastructure will be critical

Equities have seen significant flow of FII liquidity and solid sector rotation theme playing out. Even PSUs have started performing in the last couple of months as they were immensely undervalued. Sector rotation theme is likely to play out in the early part of 2021 as underperforming sectors like FMCG could gain traction. Also, budget could put more thrust on the infrastructure sector as that is the key for creating jobs. Thus, sector rotation and selective plays related to infra could deliver good returns in 2021.

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