Sharing its top picks for the new year 2023, domestic brokerage and research firm Motilal Oswal has suggested 14 stocks that investors can look to buy. Its top recommendations include Axis Bank, State Bank of India, Larsen & Toubro, ITC, Maruti Suzuki India, UltraTech Cement, Titan Co, PI Industries, Macrotech Developers, Indian Hotels, Bharat Forge, Westlife Development, Infosys, and Apollo Hospitals Enterprise.
Despite the global headwinds, Indian equities outshined in 2022 and gave net positive returns compared to the double-digit negative returns by most emerging and developed markets.
However, global factors like recessionary fears in the US and Europe, geopolitical risks and rising Covid-19 cases in China are likely to bring in volatility in the coming year, said Motilal Oswal Broking and Distribution.
Sectors that will Shine in 2023
Against the backdrop of a promising domestic growth outlook, Motilal Oswal expects two themes to play out in 2023 – credit growth and capital investment.
Motilal Oswal Broking expects sectors like banks, financial services and insurance, capital goods, infrastructure, cement, housing, defence, and railways to be in focus.
Year-to-date, the benchmark Nifty50 has risen 7 per cent, compared to the 10-20 per cent fall witnessed in most global indices.
Driven by the outperformance, Nifty50 trades at 20 times its 1-year forward earnings, which seems fair for the broking firm.
As 2023 approaches, the US Federal Reserve’s policy actions with the Reserve Bank of India would hold importance, where any moderation might encourage markets to pick up momentum, it said.
Here are a few stocks where the brokerage has a “buy” call on from the large cap space.
According to Motilal Oswal, Infosys continues to see traction in the large deal pipeline, despite an adverse demand environment. It is a long-term beneficiary of an acceleration in IT spends, given its capabilities around Cloud and Digital transformation.
For SBI, the brokerage says that it is one of the few large-cap stocks available at reasonable valuation with high growth visibility (expect 32 per cent PAT CAGR over FY22-24), led by strong Retail loans and pick-up in the corporate segment. “Asset quality remains strong, with a continuous improvement, while the restructured book remains under control at 0.9 per cent. High mix of floating loans, which will benefit from loan re-pricing, will continue,” the brokerage has said.
‘We are positive on ITC fueled by a: a) better-than-expected demand recovery and a healthy margin outlook in Cigarettes, b) healthy sales momentum in the FMCG business, c) smart recovery from the Hotels business, and d) better capital allocation in recent years,” Motilal Oswal has said.
Axis Bank has been witnessing strong growth in Retail and Mid-corporate segment, which along with MSME, would remain the key growth drivers. it expects cost-to-assets ratio to moderate at ~2% by the end of FY25, which coupled with a benign credit cost would aid RoE expansion. We estimate AXSB to deliver FY24E RoA/RoE of 1.8%/18.1%.
For L&T, Motilal Oswal has has stated that it has a dominant position and market share in most of it operating verticals and is beneficiary of record high order book, improving health of Hyderabad Metro project, and revival in private capex.
For Ultratech Cement, the brokerage has noted that the company is expanding grinding capacity domestically to 131mtpa/154mtpa by FY23E/FY25-26E which offers strong growth visibility. “Further, Cement demand is expected to pick up post the festive season and volume growth should be in double-digits in FY23/24. We expect sales volume growth of 9 per cent in FY23/24,” it has stated in its report.
Titan has a strong runway for growth, given its market share of sub-10 per cent in Jewelry and continued struggles faced by its unorganized and organized peers. Its medium-to-long-term earnings growth visibility is nonpareil among large-cap Consumer and Retail companies. We expect this trend to continue, with a 31 per cent earnings CAGR over FY22-24.
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