After witnessing two muted years due to Covid-19, the spirit of the festive season seems to be coming back on track. According to market watchers, the Indian economy’s remarkable resilience in the ongoing financial year is visible with the improvement in high-frequency indicators.
All thanks to a large-scale vaccination drive undertaken by the government. Improvement in rural and urban demand is on the verge of stepping up as normal monsoon is reviving confidence in demand recovery in rural India.
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Axis Securities added that easing supply chain conditions and cool-off in commodity prices, provide a breather from high inflation. “In this context, the market narrative has shifted from inflation concern to a cool-off in inflation expectation in the next one or two quarters,” the brokerage said.
Considering the present market condition, the brokerage, in its report, recommends six stocks that may benefit from this year’s festive demand. Have a look:
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Maruti Suzuki: Target price: Rs 9,801 | Current Market Price (CMP): Rs 8,782.10
The auto major is the market leader in the domestic passenger car industry commanding a market share of about 40 per cent. Maruti Suzuki has a stronghold in the entry-level segment and with recent launches, in the compact (All-New Brezza) and mid SUV (Grand Vitara) segment it seems to be moving towards regaining lost market share by FY25E. Axis Securities expects a rise in demand from new launches along with the upgradation of the existing product portfolio and softening commodity inflation to support recovery in the margins. The company would gain further market share, driven by an expected shift towards petrol, CNG and hybrid vehicles.
Bajaj Finance: Target price: Rs 8250 | CMP: 7,162.05
Bajaj Finance is one of India’s largest NBFCs for consumer finance with a wide product portfolio comprising loans for two/three-wheelers, consumer durables, housing, and small businesses, among others. The company caters to a customer base of 60.3 million and operates its business through 1,368 urban and 2,218 rural lending branches with over 1.3 lakh distribution points. The company’s digital initiatives and business transformation are key positives to look forward to and are currently progressing well with sequential improvement visible across metrics. With the digital transformation journey likely to be completed by FY23, Axis Securities believe it should contribute meaningfully to the overall growth.
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SBI Cards & Payment Services: Target price: Rs 1,050 | CMP: Rs 958.35
Robust business momentum, improving NIMs, and muted credit costs will help SBI Cards deliver superior return on assets and return on equity of 6-6.3 per cent and 27-28 per cent, respectively, over the medium term. However, owing to intensive competition, especially from the private banks, maintaining and improving market share will be challenging and remain a key monitorable. The RBI’s proposal on linking of RuPay Credit cards with the UPI is structurally positive for the credit card industry as it will help in increasing the acceptance of credit cards amongst UPI merchants. This, in turn, would enable credit card issuers to tap into the wallet share of UPI customers or allow the migration of UPI customers to credit cards along with improving the market penetration of credit cards. With over 1 million RuPay cards, SBI Cards should be a key beneficiary of the proposal. The RBI in its recently released discussion paper has touched upon a possible cap/regulation of MDR on credit cards, which if implemented, could impact fee income/profitability.
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Trent: Target price: Rs 1,530 | CMP: 1,414.15
A Tata Group company, Trent is a leading branded retail company that operates stores across five concepts – Westside, Zudio, Star, Landmark and Utsa. Superior store metrics, supply chain optimisation, diligent focus on cost rationalisation, aggressive store expansion, higher contribution from private brands and innovative offerings in the value space would be key growth drivers in the long run.
Relaxo Footwears: Target price: Rs: 1,120 (CMP: Rs 1,008.70) and V-Mart: Target price: Rs 3,350 (CMP: Rs 2,882)
Axis Securities believes value players such as Relaxo and V-Mart should see earnings and profitability improvement as rural and small towns recover coupled with market share gain from smaller/unorganized players, continued demand for quality value-for-money products in rural and smaller towns, strong festive season, and sustained product additions. Moreover, macro drivers such as lower per capita consumption in India and lower penetration will remain the company’s long-term growth drivers.
(Disclaimer: Recommendations provided in this article are authored by an external party. The views expressed herein are that of the respective authors/ entities and do not represent the views of Business Today (BT). BT does not guarantee, vouch for, or endorse any of its contents and hereby disclaims all warranties, express or implied, relating to the same. BT further urges you to consult your financial adviser and seek independent advice regarding the contents herein, including stock investments, mutual funds, general market risks etc.)
