The study, done by its Managing Director Raamdeo Agrawal, recommends Ajanta Pharma, Alembic Pharma, Astral Poly Tech, AU Small Finance Bank, Bajaj Finance, Bata India, Bayer Crop Science, Coromandel International, Dixon Technologies, Dr Lal Pathlabs, HDFC AMC, HDFC Bank, HDFC Life Insurance, Honeywell Automation, ICICI Lombard, ICICI Securities and Indiamart Intermesh, among others.
It further suggested stocks like Max Financial, Mphasis, Muthoot Finance, P&G Health, Page Industries, Syngene International, Varun Beverages and Whirlpool India.
While short-listing the stocks, the study considered companies ranked from 101st to 250th in terms of market capitalisation. It preferred consumer-facing, secular business models and eliminated cyclical businesses like auto ancillaries, capital goods, chemicals, oil & gas and realty.
“This reduced the list of companies from 150 to 114,” Agrawal said, adding that it chose companies that had 15 per cent average return on equity over the past five years. This further reduced the list from 114 to 63.
Thereafter, the study judged the business and management potential applying another set of parameters. This reduced the list from 63 to 28.
It flagged off 28 firms that are market leaders in their domains to arrive at a list of 13 companies. “We have observed that in situations of value migration, all companies benefit irrespective of market leadership. So, of the 28, we selected five beneficiaries of value migration, taking the total list of shortlisted stocks to 18,” Motilal Oswal said.
The brokerage believes financial services is quite a risky business, and here size begets size. “We mainly opted for largecaps in financials, and roped in six leading names for the portfolio, taking the total to 24. Finally, we opted for a pure digital play, even if it didn’t meet some of the above filters, taking the total to 25,” it said.
