Axis Securities sees an opportunity for investors to find value in the stock market after the recent correction, with private sector banks, metals, quick commerce, select automobiles and hotels among its preferred sectors.
The brokerage believes valuations have become more attractive and recommends a stock-specific approach, focusing on companies with sustainable earnings growth, sound management and disciplined capital allocation.
The Nifty declined 10.4% over the past year, while midcap and smallcap stocks also witnessed corrections. This has brought market valuations below their historical averages, improving the potential risk-reward for investors, said Uttam Kumar Srimal, Deputy Head of Fundamental Research at Axis Securities.
“We are now trading on a forward basis 16.4 times compared to on a historical basis it was around 18.4 times,” Srimal said, pointing to a valuation discount of around 12%.
Rather than betting on broad market trends, the brokerage prefers companies that can deliver consistent earnings growth. Its preferred sectors include private banks, metals, quick commerce, select automobiles and hotels.
Axis Securities has identified nine stocks as its Diwali picks: DCB Bank, Nephrocare Health Services, Indian Hotels Company, Ashok Leyland, Coforge, Eternal, Hindalco Industries, APL Apollo Tubes and Elecon Engineering.
DCB Bank is one of the brokerage’s preferred stocks among private sector lenders. The bank’s latest results showed encouraging credit growth, while its business momentum has also improved. Srimal said the possibility of fresh funding returning to the bank adds to the positive outlook. He also noted that the stock had corrected from its recent high of around ₹220.
Axis Securities expects private sector banks to perform better than public sector banks going forward, supporting its preference for DCB Bank.
Coforge is another top pick, despite its strong share price performance over the previous six months. The brokerage believes the IT services company’s recent results were largely in line with expectations and expects its acquisition of Encora to contribute to revenue growth. Srimal said the benefits of the acquisition are beginning to show, with the additional business expected to support growth in the coming quarters. The brokerage also expects earnings per share to improve as growth strengthens.
Watch the full conversation here
Axis Securities’ Diwali picks: Nine stocks to bet on after the market correction
Axis Securities is cautious on consumer durables, oil marketing companies (OMCs), paints, aviation, tyres and real estate, reflecting its selective approach to sectors where the outlook remains uncertain. Overall, the brokerage believes the recent correction has created opportunities, but investors should focus on companies with durable earnings growth rather than assume that lower valuations alone make every stock attractive.
Catch all the latest updates from the stock market here
NOTE TO READERS
The views and tips expressed by investment experts on CNBCTV18.com are their own, not of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.