Though consumer-facing sectors closed FY22 on a muted note with FMCG reporting growth of only 4% and the Auto sector of 5%, value-focused sectors and quality theme may outperform broader market going forward, says Axis Securities.
“The current market performance is factoring in the current rising inflation and the rising interest rate regime. As we have seen historically, in the rising inflationary scenario, value-focused sectors are likely to do well as they are the best inflation proxies. We are likely to see notable allocations in the next one to two years in value-focused sectors,” says the brokerage.
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Besides, Quality theme is also expected to outperform the broader market from the current levels considering a notable market correction and significantly increased volatility in the last three months.
For the last 3-4 months, DIIs have been supporting the market against FII selling and have added $13.3 Bn during this period while FIIs pulled out $14.3 Bn.
“In the near term, the market performance is likely to be rangebound, as a clear trend is likely to emerge only if volatility sustains at the current levels for a longer term. We maintain our Top Picks recommendation without any changes as we continue to focus on commodities and superior quality companies,” said Axis securities in its research report.
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Based on the above theme, the brokerage has identified 16 stocks to buy from large cap (7), mid cap (5) and small cap (4) segments. These stocks are expected to generate a return of 12% to 57% in 12 months.
Large cap stocks to buy in April
ICICI Bank, Bajaj Auto, Tech Mahindra, Maruti Suzuki India, State Bank of India, Hindalco Industries and Bharti Airtel. Of the 7 large cap stocks, the highest upside was seen in State Bank of India shares at closing price of Rs 494 on March 31.
Mid cap stocks to buy in April
The brokerage picked Federal Bank, Varun Beverages, Ashok Leyland, National Aluminium Company and Bata India as it top 5 midcap stock picks. Of these stocks, Ashok Leyland has maximum upside of 36% in one year, calculated on closing price of the share on March 31.
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Small Cap Stocks to buy in April
Krishna Institute of Medical Sciences, Equitas Small Finance Bank, Praj Industries and CCL Products (India) are top 4 small cap stocks to buy in April. These stocks can give a return of 16-57% in 12 months.
Meanwhile, Axis Securities believes that the market has entered into an upcycle and maintained its Nifty50 target for December 2022.
“Overall, the Indian market has entered into an upcycle of earnings with the expectation of a 20% Nifty EPS CAGR over FY21-24 against a single digit 7% growth it reported over FY09-21. We believe the market will likely follow double-digit earnings growth in upcoming years. We maintain our Dec’22 NIFTY50 target of 20200, valuing it at 22x FY24E earnings,” it said.
