Diwali 2024 Stock Picks: The Indian stock market is in a correction phase amid weak global cues. The domestic equity benchmarks Nifty 50 and Sensex logged their longest weekly losing run in 14 months, intensifying a broad-based selloff. Foreign investors continued to offload, and lacklustre corporate earnings further bogged down the sentiment, compelling indices to enter the bear market just a few days ahead of Diwali and the onset of Samvat 2081.
However, the market created history in Samvat 2080 by achieving several milestones in the last 12 months. The Nifty 50 surpassed the 26,250 mark, and the BSE Sensex surpassed 85,900 in September 2024, with both indexes gaining around 25 per cent during Samvat 2080 over resilient sentiments.
After a 19.8 per cent earnings growth in FY24, analysts expect the Nifty 50 index's net profits to grow by 6.7 per cent in FY25 and 17.3 per cent in FY26. At 24,700 level, the Nifty 50 index trades at 23.7x FY25E and 20.2x FY26E. FY25 will likely witness more broad-based growth across sectors.
Nifty earnings growth will likely remain steady at ~a 12 per cent CAGR over FY24-26. For Samvat 2081, D-Street expects sectors linked to domestic structural and cyclical themes to do well. Analysts are positive for financials, consumption, industrials, technology, and healthcare sectors.
In the current market scenario, domestic brokerage firm FundsIndia Broking has released its top six Diwali 2024 stock picks for Samvat 2081. The brokerage has selected quality stocks based on technical and fundamental parameters expected to do well in the next 12 months. It has highlighted the investment opportunities in companies across different sectors with insights, financial summaries, and risk assessments.
Let's take a look at the top six technical and fundamental stocks for Diwali by brokerage FundsIndia Broking:
1.Kalyan Jewellers: Buy Price: ₹676; Target Price: ₹846; Potential Upside: 35 per cent
The company is expanding in Indian and international markets, with notable revenue growth and increased promoter stakes. The outlook emphasizes strong growth potential despite regulatory and competitive risks.
Kalyan Jewellers is targeting to open six jewellery showrooms in overseas markets and 130 outlets in India in FY25 (80 Kalyan and 50 Candere). According to the brokerage, it has given a capex guidance of ₹250 crore for FY25.
With the scale-up of new franchise business, stable success in non-Southern business, store additions across diverse locations, new customer acquisition driven by improvement in studded jewellery share, and strong same-store sales growth (SSSG) compared to its peers, the brokerage expects the company to continue its industry-leading growth.
2.Central Depository Services Ltd. (CDSL): Buy Price: ₹1,461; Target Price: ₹1,845; Potential Upside: 26 per cent
Benefits from a monopoly in the depository space and growing retail participation, with a positive outlook focused on technology enhancements. However, regulatory and market risks are acknowledged.
CDSL invests in technology to improve its infrastructure, emphasizing hardware, application security, and top-tier technology platforms. The swift increase in demat accounts is anticipated to maintain this growth momentum.
“The company holds a monopoly in its sector. Management is optimistic about the company’s growth path, fuelled by rising retail participation in capital markets and strategic technological investments. We believe CDSL is well-equipped to seize upcoming market opportunities,” said FundsIndia Broking.
3.JSW Energy: Buy Price: ₹670; Target Price: ₹825; Potential Upside: 23 per cent
Noted for diverse energy generation with strong renewables growth. The long-term contracts and ongoing projects signal strong growth, but regulatory and execution risks are factors to watch.
The company aims to achieve a generation capacity of 20 GW and energy storage of 40 GWh before 2030. Management is optimistic about the growth opportunities the evolving power sector landscape presents. The rising number of orders boosts confidence in the company's ability to strengthen its market position and maintain its growth momentum. The brokerage anticipates the company will perform in response to the increasing energy demand.
4.Federal Bank: Buy Price: ₹189; Target Price: ₹235; Potential Upside: 24 per cent
The bank is gaining deposit market share with solid financials and improving asset quality. Expansion efforts support growth, though competition and interest rate changes present challenges. Any changes in interest rate (repo rate) may affect the bank's margins and, hence, the operation matrix.
The bank's high-yielding segments, such as credit cards and microfinance, improved its proportionate contribution during the quarter. The company added 140 branches during FY24 and targets adding 100 branches during FY25. A key factor to look out for is the company’s ability to sustain its growth trajectory and position in the industry under the new Managing Director.
5.Mankind Pharma: Buy Price: ₹2,566; Target Price: ₹3,158; Potential Upside: 23 per cent
Leading in pharmaceuticals and healthcare with expansion into new product lines. A strong market position is expected in women's health; however, patent and regulatory risks exist.
With the acquisition of BSV's high-entry-barrier super speciality business, which has little to no competition and covers the entire women's health spectrum, Mankind is targeting to be a market leader in the gynaecology-fertility segment. The company’s constantly evolving business strategy looks promising, starting from rural markets and expanding to metro cities, as well as diversifying its product mix from chronic to consumer healthcare products.
The industry faces significant regulatory scrutiny, including potential limitations or bans on products by agencies like the USFDA, which could impact revenue and operations.
6.Welspun Corp: Buy Price: ₹681; Target Price: ₹840; Potential Upside: 23 per cent
The company boasts a strong order book, indicating a positive business outlook. Its new ventures are performing well, significantly enhancing margins and expanding the order book. The strategic acquisition of WPPL will expedite its entry into India’s plastic pipes market.
Growing demand in oil and gas distribution, river interlinking, irrigation pipelines, and government initiatives like the Jal Jeevan Mission create a robust demand pipeline for the piping segment. Adopting a conservative stance for FY25, the company has set guidance of ₹17,000 crore for topline, ₹1,700 crore for EBITDA, and a 20 per cent ROCE.
The company has significant operations in foreign markets and is exposed to forex risk. Any unforeseen movement in the forex market can adversely affect the company. Any socioeconomic instability that could result in an increase in input costs, such as raw material, freight costs, etc., might negatively impact the margins and profitability.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.
