Now with Diwali just around the corner, investors must cherry pick their trades so they can reverse the trend and see the returns of their portfolios multiply.
Sensex and Nifty seem to be reversing the trend of muted performance in the last one year, with a sharp 6% in just the last five trading sessions. In the last one year, Sensex managed to gain 8% while the Nifty 50 gained merely 4%. This slow growth in the benchmark indices during the last 12 months was due to the coronavirus pandemic and the carnage it caused in March. Now with Diwali just around the corner, investors must cherry pick their trades so they can reverse the trend and see the returns of their portfolios multiply. SBICAP Securities has picked eight stocks that they suggest investors buy this Diwali. Here are the top three stock picks with maximum upside potential.
AstraZeneca is a biopharmaceutical company engaged in the business of manufacturing, distribution and marketing life-changing medicines in crucial areas of healthcare including oncology, cardiovascular, diabetes, renal, metabolic and respiratory. The outlook for India’s pharma firms is healthy forecasted to grow at a CAGR of 9.3% (±2.0%) between 2019 and 2024, reaching $ 31.33 billion by 2023. “We believe with strong presence in therapeutic diseases, the company will continue to grow at above average market rate and maintain a strong focus on cost optimization and controls in the mid to long term,” SBICAP said. At current price, the stock is trading at 132.4x/117.1x of its FY21E/FY22E earnings. The target price has been set at Rs 5,153 per share.
Timken India is a tapered roller bearings manufacturer, offering a breadth of bearing repair and related mechanical power transmission services designed to improve the reliability and efficiency of industrial equipment and machinery. SBICAP sees Timken as a play on the revival of the automobile industry. Auto sales are going up as personal mobility leaps ahead. Bearings are also used in railways and upgrades of the Rail network with the introducing new range of locomotives and faster travel are expected to create new growth opportunities. At CMP, the stock is trading at a forward PE of 51.6x/35.7 of its FY21E/FY22E earnings. Timken has a target price of Rs 1,393 per share.
Cigarette maker VST Industries is next on SBICAP’s list of Diwali picks. “The tobacco consumption pattern in India is unique in that only 9% of total tobacco is consumed in the form of legal cigarettes. The balance 91% is consumed in other forms of tobacco,” SBICAP noted. This low share of cigarette leaves ample space for firms like VST to expand. Although taxes are expected to be high, analysts at SBICAP see the growth in income as a catalyst that will help drive up sales. At CMP, the stock is trading at a forward PE of 16.3x/15.3 of its FY21E/FY22E earnings. A target price of Rs 4,106 per share has been pinned on VST Industries.
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