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How the Indian stock market (Nifty 50) rallied 47% despite of rapid increase of Covid cases? Sensex is up almost 50% from its march lows and numerous stocks surged more than 100%.
One popular explanation is that the initial crash was an 'overreaction'. Between February 20 and March 23, Nifty collapsed 37% due to possible reaction to the pandemic and expected intense lockdown. Investors expected that policymakers will announce lockdown until the pandemic ends.
But most countries have decided to ease restrictions even when daily cases continued to rise at record rate. Another reason can be 'the quick vaccine'. The initial assessment put vaccines at least 2 years away. However, since then, policymakers have poured billions in expediting the process and it seems as if we could have a working vaccine by the end of this year or may be before that.
Perhaps the damage won’t be as bad as we once feared. Maybe we will see a sharp global recovery soon enough. Maybe the markets have it all figured out, much before.
The best part is, many of the stocks still didn't participate in the massive rally and they are available at 3-5 years low valuation.
As per top brokerage houses like Morgan Stanley, UBS, Citi, Nomura, CLSA and Macquarie here are the top 10 Stocks with 10-60% Upside Potential.
- UBS On InterGlobe Aviation, Buy rating maintained Price target of Rs 1,500. (Current Price: Rs. 940, Upside Potential: 60%)
Brief about the company: InterGlobe Aviation is engaged in the Company comprise of air transportation which includes passenger and cargo services and providing related allied services including in-flight catering services.
- Well positioned to navigate Covid-19 disruption.
- Expect further market share gains by its lower-cost position, strong liquidity and high customer satisfaction.
- See upside risks to market share as competition may cut back on capacity given their weak financials.
2. Investec On UPL, Buy rating maintained Price target raised to Rs 665 from Rs 530. (Current Price: Rs. 480, Upside Potential: 10%)
Brief about the company: UPL is engaged in the business of agrochemicals, industrial chemicals, chemical intermediates, speciality chemicals and production and sale of field crops and vegetable seeds.
- Revenue miss offset by margin performance.
- Lower energy prices can impact consumption of agrochemicals in crops in Americas.
- Well placed amidst disruptions due to diverse geographical spread, expanding product portfolio and synergy benefits.
- Raise FY21/22E estimates by 2-4% to factor in higher margins.
- Valuations offer a favourable risk-reward.
3. UBS On DLF, Buy rating maintained Price target of Rs 195.
(Current Price: Rs. 142, Upside Potential: 38%)
Brief about the company: DLF is primarily engaged in the business of colonisation and real estate development. The operations of the Company span all aspects of real estate development, from the identification and acquisition of land, to planning, execution, construction and marketing of projects.
- Strength continued in office annuity business.
- Camellias cancellations have been fully absorbed.
- Reduction in overheads by ~30% QoQ was a big positive.
- Market implies negligible value to company's development business and its land bank.
- Is the top pick within the Indian property space.
4. UBS On Exide Industries, Buy rating maintained Price target of Rs 220. (Current Price: Rs. 162, Upside Potential: 36%)
Brief about the company: Exide Industries is primarily engaged in the manufacturing of Storage Batteries and allied products in India.
- Raw material cost as a percentage of sales rose despite decline in Zinc prices due to potentially older high value inventory.
- Stock remains attractive on compelling valuations.
- High exposure to replacement battery demand likely to be more resilient.
5. Citi On HDFC Bank, Buy rating maintained Price target of Rs 1,350.
(Current Price: Rs. 1044, Upside Potential: 30%)
Brief about the company: HDFC Bank Limited (HDFC Bank or the Bank), incorporated in Mumbai, India is a publicly held banking company engaged in providing a range of banking and financial services including retail banking, wholesale banking and treasury operations.
- Appointment of new MD & CEO ends period of uncertainty.
- Bank in strong position with liabilit franchise and capital position.
- Senior level management departures have not impacted performance.
6. Nomura On Aegis Logistics, Initiated coverage with buy rating Price target of Rs 260. (Current Price: Rs. 209, Upside Potential: 25%)
Brief about the company: Aegis Logistics is in the business of import and distribution of Liquified Petroleum Gas (LPG) and storage and terminalling facility for LPG and chemical products.
- Secular play on India's shift to cleaner LPG.
- Sustainable growth story not only on environmental but also socio-economic investment considerations.
- Thrust on LPG distribution should lead to strong growth over next two decades.
- Key Risks: Sharp rise in LPG prices, development of cross-country natural gas pipeline infra.
7. CLSA On UltraTech, Upgraded to buy from outperform Price target raised to Rs 5,000 from Rs 4,160. (Current Price: Rs. 4000, Upside Potential: 25%)
Brief about the company: UltraTech Cement is engaged in the manufacturing and selling of Cement and Cement related products.
- Results ticked all the right boxes.
- Deleveraging and cost control will remain the key with sustained volume growth.
- Risk-reward most attractive among growth leaders in the sector.
- Raise FY21-23 Ebitda by 10-13%
8. UBS On Godrej Consumer Products, Buy rating maintained Price target of Rs 850. (Current Price: Rs. 690, Upside Potential: 24%)
Brief about the company: Godrej Consumer Products is engaged in a fast moving consumer goods Company, manufacturing and marketing Household and Personal Care products.
- Solid performance in a disrupted quarter.
- Management is hopeful of turnaround in its Africa business.
- Likely to standout among peers in the near-term given strong hygiene portfolio and an improved outlook for household insecticides.
9. Macquarie On HDFC, Outperform rating maintained Price target of Rs 2,095. (Current Price: Rs. 1779, Upside Potential: 18%)
Brief about the company: HDFC is providing finance to individuals, corporates and developers for the purchase, construction, development and repair of houses, apartments and commercial properties in India.
- Decent show in a tough quarter.
- 70% of builder loan book is under moratorium.
- Challenges to retail loan growth remain owing to lockdowns.
- Excess provisions can cushion against future losses.
- Recoveries related to Jet Airways and Orissa Slurry exposure will be accounted for next quarter.
- Best Housing Finance company to own with a sound balance sheet.
- Expect HDFC to capture market share in the long run.
- Recent capital raise announced will be an added catalyst.
10. Morgan Stanley On State Bank of India, Equalweight rating maintained Price target raised to Rs 215 from Rs 205.
(Current Price: Rs. 191, Upside Potential: 13%)
Brief about the company: With a legacy of over 200 years, State Bank of India (SBI) traces its ancestry to the Bank of Calcutta founded in 1806 and is the oldest commercial bank in the Indian subcontinent. SBI is an Indian multinational, public sector banking and financial services statutory body, fostering the nations 2.6 trillion-dollar economy and serving the hopes of its vast population.
- Better than expected margins, strong deposit growth and lower moratorium aids good quarter.
- Macro climate is tough and will weigh on margins and asset quality in H2FY21.
- Need to see if this good performance can be sustained.
- Remain on the sidelines due to relatively low margin on safety despite cheap valuations.
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Research Analyst (SEBI Regd.)
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