InCred lists 20 ’high conviction ideas’: HDFC Bank, Maruti among ’add’ calls; IndiGo, Tata Steel among ’reduce’
Brokerage house InCred Equities has come out with 20 ‘high conviction ideas’ for the month of November including 17 'add' calls and 3 'reduce' calls.
The sustenance of strong domestic growth amidst a fragile global context extends comfort to the Indian market, said brokerage house InCred Equities in its recent note. It added that the elevated oil prices and regional rainfall distribution shortfall are some challenges that will remain in the short term.
The Indian market was under pressure in October with the benchmark Nifty50 correcting by 6 percent from its peak hit in September. Also, all sectoral indices closed on a negative note except the realty index. The Nifty Midcap index fell almost 4 percent while the Nifty Smallcap index lost nearly 2 percent last month.
After a weak October, experts believe that the near-term volatility will remain for the Indian market but the outlook is positive in the long run.
"While Nifty-50 valuations are comfortable, state election and Middle East geopolitical uncertainty may keep index range-bound for December quarter. We maintain a Nifty-50 target upside of 11 percent with target of 21,103," said InCred.
For the month of November, the brokerage has made certain additions and deletions to its model portfolio; let's take a look:
Additions: According to InCred, the recent stock price correction has given an opportunity to upgrade 3 stocks to the ‘high conviction list’ – Cyient DLM, Data Patterns, and Tech Mahindra.
It has included Data Patterns (ADD) for the benefits of increasing in-house product development and annuity-based exports. Meanwhile, Tech Mahindra's (ADD) stock correction provides an opportunity to play on leadership change to drive new business wins and profit margin normalisation to industry peers, it noted. Moreover, Cyient DLM (ADD) is a beneficiary of rising defense spending by the USA and Israel, said the brokerage.
Deletions: However, it has removed cement stocks UltraTech Cement and Dalmia Bharat as they have significantly outperformed the benchmark index.
Here's a look at its stock ideas for November:
While the brokerage has ‘add’ calls on most of its stock ideas, it has 3 with ‘reduce’ calls - Clean Science & Tech, InterGlobe Aviation (IndiGo), and Tata Steel.
Stocks with ‘add’ calls include Ashok Leyland, BCL Industries, Bharat Electronics, Bharat Forge, Camlin Fine Sciences, Container Corporation of India, Cyient DLM, Data Patterns, Globus Spirits, HDFC Bank, KEI Industries, Mahindra & Mahindra Finance, Maruti Suzuki, Reliance Industries, Spandana Sphoorty Financial, Tech Mahindra, and Thermax.
Among the stocks with 'add' calls, the brokerage sees multibagger returns in Globus Spirits with 263 percent potential upside (target ₹2,929), followed by Camlin Fine with 103 percent potential upside (target ₹300). Meanwhile, it expects over 50 percent upside in BCL Industries, Data Patterns, and M&M Finance.
Apart from these, the brokerage sees between 20 percent and 47 percent potential upside in Ashok Leyland, Bharat Electronics, CCI, Cyient DLM, HDFC Bank, Maruti Suzuki, Spandana Sphoorty, and Reliance Industries.
Reduce Calls
Clean Science: The brokerage has a target price of ₹660 for the stock, indicating a downside of 49 percent. Hindered amine light stabilizer (HALS) is perceived as a panacea for Clean Science and Technology, however, entry barriers in this business are high, said the brokerage. Also, the assumption that it will garner a 10 percent market share in a highly competitive market is misplaced, it added. The company has no sustainable advantage over rivals as margins are falling and the foray into the competitive TBHQ +PQ space shows growth avenues are lacking in its current portfolio, further noted Incred.
InterGlobe: The brokerage has a target price of ₹1,600 for the stock, implying a 35 percent downside. As per the brokerage, business travel is likely to be muted as the COVID-19 pandemic altered the entrenched habit of air travel for meetings. Further, the insolvency filing by rival Go First (7 percent market share in Mar 2023) is likely to improve the profits of other players in the short term. However, the history of Indian aviation reveals that supernormal profits are short-lived, noted the brokerage.
Tata Steel: The brokerage has a target price of ₹82 for the stock, implying a 31 percent downside. In the foreseeable future, the steel market is likely to experience sustained downward pressure, resulting in no improvement in steel spreads, it said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.
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