Stocks to Buy: HDFC Bank, ICICI , Axis, AU Bank are the 4 top picks of BNP Paribas among Banks: SBI Life in Insurance
- Stocks to Buy: HDFC Bank, ICICI , Axis, AU Bank are the 4 top picks of BNP Paribas among Banks; SBI Life in Insurance . They prefer private banks, IT services, telecoms and are under weight on staples, automobiles and pharma
Stocks to Buy- BNP Paribas in its India Strategy report says that India looks solid on most parameters.
Strong domestic and FPI flows into Indian equities boosted domestic stocks in 2023. BNP Paribas sees no reason reason for this to change. The macro environment seems favorable with inflation easing. Strong flows, earnings growth and macro-outlook all remain favorable.
The Nifty 50 target of BNP Paribas for December-24 stands at 23,500
For the US, BNP Paribas economists expect 6 rate cuts in 2024 and a soft landing. India’s inclusion in global bond indices may support bond yields
But since all good things come at a price and valuations of Indian market appear expensive
Investment theme and stock selection
BNP Paribas continues to prefer financial services, information technology and telecom, while they have added logistics in their outperformance space. They expect consumer staples, pharma and autos, to underperform given their rich valuations.
Banks -Credit growth is likely to remain healthy, driven primarily by retail and SMEs , while the possibility of an eventual pick up in corporate loan growth provides optionality of further growth acceleration, said analysts at BNP Paribas. Deposit growth, as per them remains reasonably robust at 12.9% y-y, addressing worries about supply-side bottlenecks. The Margin moderation from cyclical peaks has almost played out, and with operating costs already having set a high base in FY24.
BNP Paribas expects FY25 earnings growth to track close to loan growth, with few exceptions. The Valuations remain attractive with most banks trading at or below their long-term (10-year) median Next Twelve months Price by Book value despite the promise of a corporate leverage cycle and best-in-decades balance sheet health and profitability metrics.
HDFC Bank, ICICI Bank and Axis Bank are among their top -3 large-cap ideas in order of preference. AU BANK is their only preferred mid-cap space.
Insurance: Given the low base BNP Paribas expect in FY24, FY25 the Insurance companies should deliver high top-line growth along with steady margins. As per BNP the sustenance of the recent uptick in pure protection (term life) sales is going to be a critical factor in determining the extent to which VNB (value of new business) growth can surprise on the upside in CY24.
Also, ULIP sales could potentially get a leg up, especially for larger-ticket fixed-income policies due to its relatively tax-efficient return offerings, even for fixed-income plans, says BNP Paribas. Valuation attractiveness differs materially by company, and SBI Life is their top pick in the space.
Information technology- IT remain among other sectoral picks of BNP Paribas. With easing inflation and the Fed's indication of rate cuts, they see discretionary IT spends likely resuming in 2024, which should accelerate revenue growth for Indian IT services companies. Moreover, the recent positive tilt in commentary from the top four companies provides comfort they added.
Telecom- In the space after witnessing around 20% tariff hike in 2019 and 2021, BNP Paribas expect another tariff hike, likely post the general elections, which should aid growth for the telecom industry.
BNP Paribas analysts also expect capex to moderate in FY25, as both the large operators have made heavy investments in the past few quarters. Moreover, delays in fund raising and inability to invest in 5G by Vodafone Idea should augur well for the two larger operators, said analysts at BNP Paribas. They continue to like the telecom space and believe Airtel as well as Jio are well-positioned.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
Als
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
- Top Gainers
- Top Losers
- 52 Week High