Samvat 2081, a New Hindu calendar year that begins on the auspicious festival day of Diwali, may lack the fireworks that is normally associated with the festival. Every year, brokerages come out with sector-specific stock picks or thematic recommendations during Diwali, giving an indication of the likely market favourites in the ensuing year. Unlike earlier years where analysts predicted some themes, such as new-age companies, automobiles, infrastructure, pharma, etc, this time around they have failed to latch on to any single theme or have clear favourites in terms of stocks.
Given the hefty valuation of several stocks due to a sharp run-up in share prices, geo-political tension, relatively higher interest rate regime, lower-than-expected Q2 performance and the upcoming US Presidential election, analysts seem to remain rather cautious.
Only a few stocks – Gravita India, National Aluminium Company, Jyothy Labs, NCC and SBI – have appeared in the “Diwali Picks” of a few brokerages.
“The current market environment is very uncertain and is being reflected with high volatility in all asset classes. One may look for probable future returns and diversification over high-risk investments, which may grow over the time to potentially secure future,” said Tapan Patel, Fund Manager – Commodities, Tata Asset Management.
Swapnil Aggarwal, Director, VSRK Capita, advised investors to consider systematic investment plan (SIP) in small-cap and mid-cap mutual funds.
The small-cap and mid-cap sectors, while inherently riskier, are well-suited for long-term investors looking to generate significant returns. “These funds are expected to outperform others in the coming decade, making them an attractive option for those with a higher risk tolerance. They can serve as powerful vehicles for achieving long-term financial goals, such as retirement or other major life milestones,” he added..
However, while focusing on high-growth small-cap funds, it’s wise to maintain a diversified portfolio that includes large-cap and mid-cap funds. This strategy can help balance your risk profile, ensuring stability and minimising potential losses during market downturns. When selecting mutual funds, prioritise those with a proven track record of consistent performance over 5-10 years and look for options with low expense ratios to maximise your returns, he added.
Stock picks
Gravita India: As a major battery recycling player in the country, Gravita India is likely to be a key beneficiary of the Centre’s push for electrification of transport and policy changes to bring about this change. It is this opportunity that has brokerages such as Axis Securities, Kotak Securities and JM Financial go bullish on the stock. “The stock currently trades at 27x FY27E EPS, and we value it at 37x FY27E EPS given the strong growth potential and robust returns,” said Axis Securities, while setting a target price of ₹3,000.
Kotak Securities has a target price of ₹2,800, while JM Financial has set a target price of ₹3,068.
National Aluminium Company: Kedia Advisory, which recommended a target price of ₹320, finds significant opportunity for Nalco in its wind power project expansion plans with an additional 25.5 MW under implementation.
Systematix Group is bullish on the company’s brownfield alumina expansion. “Additional alumina volume will assist in higher topline from FY26 onwards. The aluminium smelter expansion of 0.5 mtpa is also planned over the next few years,” the report says, with a target price of ₹275, while HDFC Securities has set a target price of ₹270.
Jyothy Labs: In FY24, Jyothy Labs experienced notable revenue growth, primarily due to higher volumes and slight price adjustments, explains Religare Broking for its bullish view on the stock with a target price of ₹684, an upside of 28 per cent. Meanwhile, AngelOne Broking and HDFC Securities too feature the stock of Jyothy Labs in their Diwali Picks.
NCC: The construction company’s healthy topline growth along with stable finance costs is likely to drive 25.9 per cent earnings CAGR over FY24-27E, says the research report from ICICI Securities with stock price target of ₹400. AngelOne, which has a similar target price, is of the opinion that the government focus on infrastructure development and transportation is likely to support revenue for the company.
State Bank of India: India’s largest public sector bank, SBI has made significant strides in technology adoption, which have helped the bank drive margins by maintaining cost efficiency. Besides, the bank’s “retail personal advances growth of 13.60 per cent highlights opportunities in consumer lending,” says a note from Religare Broking, which has fixed target price at ₹941. The digital drive also offers SBI better cross-selling potential, adds Kedia Advisory, with a target price of ₹1,240 for the stock.
“We believe SBIN is equipped to sustain growth, given its surplus liquidity and a comfortable LDR. We build in marginal NIM compression over FY24-26E on the back of a turn in the rate cycle during H2FY25,” says HDFC Securities with a target price of ₹960.
