Shares to buy in July: Sensex and Nifty each corrected more than 8 percent in June 2022, posting their worst monthly performance since March 2020. Still, the weakness may not be over yet. While the broader market took a more cautious approach over the month, mid and small caps each fell 7 percent per month. Overall, similar to May’22, June’22 also proved to be a volatile month, led by weaker global signals such as higher inflationary pressures in the US market, a rise in US 10-year bond yields and a 75 bps . rate hike by the US Fed to curb inflation. Two pivotal events, the RBI MPC and the US FOMC meeting, were scheduled for June 22 and have now passed, providing clarity amid mounting uncertainty.
Analysts at Axis Securities said: “In line with expectations, all central banks are now focusing on managing inflationary pressures by propelling rising interest rates over the next six months. With this in mind, how the short-term sustainable demand scenario plays out should be closely monitored. In any case, we foresee inflation to pick up in the coming months, but we think it will be followed by some moderation in the next quarter or two.”
Axis Securities has picked up the best trading ideas for the month of July – 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 July basket are below:
ICICI Bank (ICICIBC) is one of the largest private sector banks in India with business activities spanning Retail, Corporate and Insurance among others. The bank outperformed its competitors and ticked most of the boxes in terms of growth, margins and asset quality. Higher credit growth, improving corporate earnings and a strong provisioning buffer coupled with a strong deposit
franchise will assist the bank in achieving ROAE/ROAA expansion in FY23-24E. In terms of valuation, we think the sofa is still on a comfortable footing. We maintain a BUY on the stock with a revised target price of Rs 1,000/share (SOTP base core book at 2.8x FY24E and Rs 173 Subsidiary value).
Bajaj Auto (BAL) remains the second largest player (19 percent market share) in the domestic motorcycle segment and remains the largest two-wheeler (2W) exporter in India. Bajaj Auto appears to be responding to the demand normalization and premiumization trends in the 2W industry, which should support profitability and operating performance going forward. In addition, we expect the company to deliver further export growth, driven by its market leadership position, brand equity and improved distribution network. Bajaj Auto remains our preferred choice in the 2W segment, given reasonable valuations and strong medium-term growth prospects. We maintain our BUY rating for the stock and value it at 17.5x FY24E EPS to arrive at a target price of Rs 4,350.
Tech Mahindra is India’s leading IT services provider to many business conglomerates. We believe that Tech Mahindra has a superior mix of services and multiple long-term contracts that are well spread across the various industries, reducing its reliance on a single industry. In addition, we foresee healthy traction in the communications and enterprise sectors that will significantly accelerate the company’s revenue growth going 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 target price of Rs 1,700/share. TP implies a 70 percent increase in CMP.
Maruti Suzuki India Ltd (MSIL) is the market leader in the domestic passenger vehicle industry with a market share of approximately 45 percent. New launches aimed at filling the gaps in its portfolio are likely to improve the overall product mix. The company would continue to gain market share, driven by an expected shift to gasoline and 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 see strong growth CAGR of 16 percent over FY22-24E. We have a BUY rating for the stock with a target price of Rs 9,800 with the stock valued at 27x the FY24E EPS.
National Bank of India
State Bank of India (SBIN) is the largest public sector bank in terms of assets, deposits, branches, number of customers and employees and also has a pan-India presence. Among the PSU banks, SBI remains the best game on the
gradual recovery of the Indian economy thanks to the healthy PCR,
robust capitalization, strong liability franchise and improved assets
quality prospects. We believe that normalization in credit costs and improved
growth outlook should lead to double-digit ROEs of 14-15 percent more than
FY23-24E. Against this background, we maintain a BUY recommendation for the stock with
a revised target price of Rs 665/share (SOTP core core book at 1.3x
FY24E and Subsidiaries at Rs 185)
The expert opinions and investment tips in this News18.com report are their own and not the website’s or its management. Users are advised to contact certified experts before making any investment decisions.
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