The global brokerage firm, CLSA bets for the large-cap stocks in run up to the general election next year.CLSA believes Prime Minister Narendra Modi would back to the power.
However, it’s unlikely that the party would get an absolute majority like in 2014 and would only be able to win with coalition partners, CLSA said in a report.
“While the equity market anticipates a long winter for Congress (Party) and is already building in a Modi win, time will tell whose plot armour is the strongest. Meanwhile, we advocate a large-cap portfolio that comprises rural plays, housing and exporters”, said Mahesh Nandurkar, India Strategist, CLSA.
CLSA’s analysis of both the leading parties declaration suggests a consensus exists on several main policies, such as affordable housing, farmer welfare, job creation and infrastructure. Current positive trends in housing and rural recovery should play out irrespective of the outcome, said Nandurkar.
Here are the CLSA’s top 9 stocks going into next election are:
1. Dabur India Ltd.
The company is beneficiary for a pick-up in rural consumption among lower competitive intensity. It continues to benefit from changing consumer preferences for Ayurveda/naturals products. It has sharpened its focus on growth and speed of innovation. Growth will be aided as the speed of new launches are set to accelerate.
2. Godrej Properties Ltd.
The company has a strong nationwide presence with profit on group resources. Pre-sales reached new highs in the last financial year, as it begins on new project additions. Impressive corporate governance, professional management and track record of on-time completions.
3. HDFC Ltd.
Healthy core and attractive valuations can drive re-rating for the stock. Well positioned to benefit from mortgage-demand is a small increase in affordable and mid-income housing. Recent hikes in lending rates can help manage funding costs concerns. Spreads to stay stable despite the rise in funding costs.
4. IndusInd Bank Ltd.
Better CASA (current account savings account) ratio and expansion into new retail segments will drive growth for the lender. Scale up of Bharat Financial Inclusion will be key to profitability. Casa scale-up helping to grow and de-risk.
5. Infosys Ltd.
The IT major has Improving demand outlook, better execution, and reasonable valuations. A renewed focus on execution drives up client mining and captures growth. Focus on digital services has smarter efforts.
6. Mahindra & Mahindra Ltd.
The company is getting profit from the strong tractor, light commercial vehicle demand, and with new sports utility vehicle launches. The outlook for rural demand continues to remain strong, despite a below-normal monsoon.
SUV volumes very slow out and the upcoming launch of a new MPV has the probable for growth.
7. Sun Pharmaceutical Industries Ltd.
Special pipeline monetization progressing well for the company as 3 launches in FY19. Strong strategy execution in other verticals apart from the US can drive earnings growth. Resolution of regulatory issues with the U.S. FDA.
8. ITC Ltd.
Cigarette recovery and reasonable valuations provide an opportunity for the company. Cigarette volumes and EBIT growth set to recover; concerns over cigarette taxes are exaggerated.Valuation of 29x one-year forward earnings at a significant discount to peers.FMCG business is gaining scale through the negligible contribution to profits.
9. Maruti Suzuki India Ltd.
In recent years, successful new products have led to the company’s strong India franchise becoming even more solid. Differentiated sales strategy has boosted confidence in the stability of its dominant market share. Competition is also easing as several global OEMs are focussing back on their key markets rather than on India. Some costs pressures but has a lift to offset.