ICICI Securities sees Nifty at 13,400 in next one year; LT, NMDC among top 10 picks

October 09
13:02 2019

Analysts continue to be upbeat about Indian market despite the Nifty tumbling from September 23 high of 11,694. In a recent note, ICICI Securities maintained its one-year target for the Nifty at 13,400, which translates into an upside of 20 percent from current levels.

The domestic brokerage firm maintained its overweight stance on growth and quality companies catering to the domestic demand recovery. ICICI Securities top picks include Bandhan Bank, Ultratech Cement, L&T, Siemens, NMDC, Greenlam, TVS Motors, Galaxy Surfactants, Dabur, and JB Chemicals and Pharma.

Fear indicators, which comprise India VIX and gold prices,  have been rising since the beginning of Q2FY20, leading to high volatility in the equity markets, but H2FY20 could throw in some positive surprises.

The fall in the equities is in sync with global volatility driven by geopolitical risks and slowing growth. Emerging Market flows, including India, improved month-on-month in September, but continued to remain volatile.

The domestic brokerage firm said of the top 500 stocks, 212 rose more than 8 percent immediately after the tax cuts. But, 85 stocks had given up most of their gains and 51 were in a negative territory.

However, 127 stocks retained gains of at least 4 percent, out of which, 60 were up more than 10 percent. Interestingly, quality and growth outlook vs high-risk perception was the key differentiator for the divergence in stock performance instead of overall sector risk (NBFCs, industrials, banks, etc. have both winners and losers).

ICICI Securities highlighted that risk spreads were declining: CDS spreads (India), CP spreads over T- Bills and NBFC CP spreads over non-NBFC CPs.

On the global front, weak data on growth in the US as measured by the ISM manufacturing index further brightened  the chances of the US Fed remaining accommodative, while they increased buying of US treasury in September (US$ 22bn).

Starting off the QE2 by European Central Bank in November will further add to global liquidity along with accommodative stance from most other major central banks.

In India, the Reserve Bank of India has cut the repo rate further by 25 bps to 5.15 percent, with a commitment for further reduction as long as growth remains weak. All these factors will give comfort to equity investors.

On the growth front, the domestic brokerage firm is of the view that GDP was expected to rise to 7% in H2FY20, thanks to government capex of Rs 732 billion, fall in crude oil prices, improvement in capacity utilisation, and strong sales recorded in e-commerce channels.

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