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    Top 10 Nifty stocks that surged upto 42% since PM Narendra Modi took charge

    Synopsis

    The rally post polls was led by cyclicals on anticipation of reforms. However, investors continued to churn portfolios post the earnings season.

    ET Online
    MUMBAI: Prime Minister Narendra Modi has completed 100 days in office. The business sentiment has improved since then and the inflows from foreign institutional investors are taking the Indian markets to new highs.
    It has been a dream run for the Indian equities since Modi took charge. The Nifty has rallied over 9 per cent in this period to close at an all-time high of 8,083.05 on Tuesday.

    The rally post the election was led by cyclicals on anticipation of reforms. However, investors continued to churn portfolios post the earnings season.

    According to an ET poll, a majority of 50 CEOs are preparing to make fresh investments, step up hiring, all in anticipation of a 6-8 per cent GDP growth most feel is possible over the next three years.

    A look at the 10 Nifty stocks throws a pleasant surprise. 60 per cent of the 10 Nifty stocks come from defensive such as pharmaceuticals, FMCG and IT sectors.

    Following are the brokerage views on these top 10 performers in Modi's raj:



    Image article boday


    Sun Pharmaceuticals

    The company posted inline first quarter results and the management maintained its guidance of sales growth of 13-15 per cent in FY15e. The stock also attracted investors on Ranbaxy merger reports as well.

    Sun Pharma's product pipeline in the US remains strong with 140 pending ANDAs. In Q1, Sun Pharma filed 14 ANDAs and received FDA approvals for six products. Taro had filed five ANDAs during Q1, taking the cumulative pending ANDAs to 31

    "We roll forward our target price to September 2015 from March 2015 and value Sun at 25x (in-line with its current stock valuation, up from 20x) September 2016 EPS of Rs 36.6 and add the NPV of Rs 10 for Gleevec to arrive at our new target price of Rs 924," said an HSBC report.

    "We believe a valuation multiple of 25x is justifiable for SUNP given its intact long-term growth outlook. The key risks in our view are a slow pace of approvals post the recent import alert at the Karkhadi facility and a delay in the Ranbaxy merger," the report added.

    Lupin

    The company surprised the street positively with its quarterly earnings and margins.

    According to analysts, the management's focus on margins has turned even more aggressive and will be a key valuation driver.

    ANDA Pipeline continues to be impressive with 20+ launches in the next 12 months and 130 new launches over the next 2- 3 years.

    "Portfolio mix also remains healthy with well diversified contribution from anti diabetes, CVS, ophthalmology, gastro, women healthcare et al. Lupin continues to look for M&A targets in brands, technology platform and access to emerging markets," said a Dolat Capital Market report.

    Cipla

    The company has launched Fluticasone/Salmeterol combination inhaler, a generic version of GSK's Advair MDI, in Germany and Sweden.

    The launch establishes Cipla as the front runner in combination MDIs as no other generic company has received approval in this category so far. Analysts see it as a significant development for the company.
     
    Most brokerages have increased their EPS estimate and target price on Cipla.

    "We believe this is a significant development for Cipla as it instills confidence that time has come for the company to monetize its respiratory franchise in the developed markets. We expect launches in more lucrative markets such as the UK (US$432mn), France (US$64mn) and Spain (US$44mn) to follow over the next 12 months," said a Bank of America Merrill Lynch report.

    Hindustan Unilever

    Even as the growth remained sluggish, the company reported a 6 per cent volume growth.

    "We remain confident of HUL's ability to drive a sustained performance through the medium to longer term, claiming its rightful place as a core LT holding," said a JM Financial Institutional Securities report.

    "Premium-valuation could pose some challenge from a one-year return perspective, especially since the stock has run up sharply in recent times, driven to some extent by corporate-action expectations, we believe," the report added.

    The brokerage has a 12-month target price of Rs 630 on the stock.

    Tech Mahindra

    The stock has had a stellar run in the past few quarters. The company has been consistent in its quarterly results and meeting street expectations.

    Despite weak IT spending in the telecom vertical, the company improved its relative market share among offshore vendors. It achieved this through large deal wins, strategic acquisitions and a concerted effort to expand its portfolio beyond traditional services.

    The stock remains Kotak Institutional Equities' preferred pick in the IT sector.

    "In recent years TM has made several strategic moves to leverage its vertical expertise to enter adjacent areas like carrier network management and art-to-part offerings, which are beyond the traditional comfort zones of IT services companies. These give the company the ability to win larger end-to-end deals and build sticky relationships with marquee clients," the report said.

    "It has also made several strategic acquisitions to gain access to key clients, which have the potential to become large. We view these steps by TM to expand its addressable market and consolidate its leadership in areas of strength as encouraging," the report added.

    The brokerage has target price of Rs 2,300 on the stock.

    DRL

    The company has been one of the top performers with robust market share gains in new launches.

    According to Antique Stock Broking, the company now has two-third market share in its biggest selling drug: Dacogen. It has gained positive market share in its recent launches of Caduet and Avelox.

    Analysts remain bullish on the stock given its strong product pipeline for the US market.

    "We maintain a Buy on the stock, considering the strong product pipeline in the US market, anticipated recovery in Russia and the CIS, steady growth in domestic formulations and reasonable valuations," said a Anand Rathi report.

    "The launch of FTFs in the US market and the more-than-expected growth in the home market may see a further upside to margins. The stock now trades at 20x FY15e and 17.6x FY16e earnings. We maintain a Buy, with a revised price target of Rs 3,200 based on 20x FY16e earnings," the report added.
     
    BPCL

    The oil marketing companies have been on a roll as monthly hike in diesel prices is likely to eliminate under-recoveries soon. A stable currency and decline in crude oil prices in the international market are also driving the sentiment in BPCL.

    According to a Goldman Sachs sensitivity analysis on changes in marketing margins for oil marketing companies, there is upside risk to if gas oil marketing margins in India converge to that in China.

    "We still like Buy-rated OMCs HPCL and BPCL as we believe they are good ways to take exposure to medium/long-term oil demand growth in India with strategic marketing assets at reasonable valuations," the report said.

    "We believe benefits to state-owned upstream will accrue slowly as the government reduces its subsidy and natural gas price hikes on current volumes could be lower than consensus expectations," it added. The brokerage has a target price of Rs 701 for BPCL.

    Maruti Suzuki

    The company is expected to benefit with the pick-up in Indian economy. Car sales have improved in the last few months and the company may reverse discounts on cars, which will improve its margins, say analysts.

    "We assume only the economy-linked discounts will reverse over the next two years, leading to a 150 bp margin expansion for Maruti. In this context it is also interesting to see the discount contraction that happens when a new model is launched. Given Maruti has a strong model cycle going forward, this is another factor which will impact margins," said a Credit Suisse report.

    "We increase our estimates for FY16 by 3 per cent and introduce our FY17 estimates, which are 15 per cent higher than the street. Maruti's stock has done well in the last year and is now a consensus buy," the report added.

    Kotak Mahindra Bank

    The bank's quarterly results were better than street expectations.

    The quarter ended June marked KMB's return to the growth track-both numbers and outlook. Its loan book, after a mere 9 per cent growth in FY14, is likely to end FY15 with a 20 per cent surge.

    "We are positive on KMB's earning trajectory in the backdrop of robust economic climate as increased growth will help sweat the capital better and fire up the operating leverage machine. While better prospects for capital market related businesses are positive, recent RBI regulations are likely to dampen the debt AMC business," said an Edelweiss report.

    "We anticipate RoA to improve to 2.8% by FY16E. However, bank valuations at 3.2x FY16E P/BV factor in a fair bit of upside. Hence, we upgrade to 'HOLD' with a target price of Rs 954 from Rs 723," it said.

    Asian Paints

    The company is focusing to increase its market share in foreign countries. It plans to enter Indonesia and has applied to the authorities to set up a manufacturing facility at Jakarta.
     
    Its wholly-owned subsidiary, Berger international, with its strong Berger brand is already present in the adjacent markets of Singapore and Malaysia. Currently the international market contributes 13 per cent to the overall sales of Asian Paints.

    "The company is likely to take two years for commercial production to start, post receiving approval from the Indonesian government," said an Edelweiss report.

    "We expect the domestic decorative volume growth to improve (riding recovery in GDP growth) and we are positive on the home improvement business. Reiterate 'BUY' and rate it 'Sector Outperformer' on a relative return basis," the report added. The brokerage has a target price of Rs 720 on the stock.





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    (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2024 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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