At least five Nifty50 stocks now command “strong buy” or “buy” in over 90 per cent analyst recommendations despite scaling lifetime highs in August, data compiled from Refinitiv suggests.
ICICI Bank, State Bank of India, Larsen & Toubro,
and have the highest number of “buy” or “strong buy” calls, as a proportion of analyst views. Three of them — SBI Life Insurance, ICICI Bank and State Bank of India — have no “sell” calls, data suggest.
Wipro, Bajaj Finance, , JSW Steel and Divi’s Labs are among the stocks with comparatively lower bullish bets. A total of 17 Nifty50 stocks have hit record levels in August so far.
SBI and ICICI Bank are the two biggest consensus buys, despite the stocks rising to new highs. According to data, both stocks have 27 “strong buy” calls and 17 “buy” calls, with just one “hold” call each.
Larsen & Toubro and Bharti Airtel come next, with the former having 20 “strong buy” and 16 “buy” calls out of 37 analyst recommendations. L&T has only one “sell” recommendation. In the case of Bharti Airtel, the telecom stock has 16 “strong buy” calls, 13 “buy” and 1 “hold”. SBI Life was the other stock with over 90 per cent positive calls. This stock has 19 “strong buy”, 13 “buy” and 2 “hold” calls.
SBI hit an all-time high of Rs 467.45 on August 4. On Monday, the scrip was quoted at Rs 428.25, down 8 per cent from its peak level. Nomura India said SBI exited the second Covid wave with a strong balance sheet. Its gross stressed assets stood at 7.2 per cent of loans compared with 7 per cent in the pre-Covid period, it said. “The incremental NPLs were largely from retail (of which home loans are a larger part) with low loan-to-value and to salaried customers. As a result, we expect NPL recovery/upgrades to be equally quick,” it added, suggesting a target of Rs 600 for the lender.
In the case of ICICI Bank, Yogesh Mehta, Founder at Yield Maximisers, said the lender was showing strong leadership within the private sector space. “It has shown strong performance in terms of the balance sheet as well as profit & loss. The valuations are also very much attractive. Even if we compare it with HDFC Bank, the leader, there is a difference between the price-to-book value between the number one and the number two player. The core banking retail participation, CASA ratio, deposits and loan book are all sustaining at higher single digits,” Mehta told ET NOW. This stock hit its all-time high of Rs 717.40 on August 4. On Monday, it traded at Rs 702.70.
In the case of L&T, labour availability returning to normal levels — after dipping a bit in the previous quarter — buoyed the stock. The company is expecting revenue growth in the low-to-mid teens zone. It has forecast flat margins in FY22. The majority of the company’s domestic orders are from state/central PSUs. The government’s efforts — such as a cut in corporate tax and the introduction of PLI schemes — should lead to some revival in corporate capex in the medium term, it said. Despite higher commodity prices, the company believes cost efficiencies will help negate negative impact of some transport infrastructure projects. It sees margins at FY21 levels, Harish Barai and P Ramakrishnan of L&T told Emkay Global. The brokerage has a “buy” rating on the stock, with a target of Rs 1,870.
This scrip hit a fresh record high of Rs 1,677.05 on Monday.
Bharti Airtel also hit a new high of 644 in Monday’s intraday trade. ICICI Direct said non-wireless business momentum, along with Africa performance, continued to be robust for Bharti Airtel. The favourable industry structure was a good enough kicker for the eventual hike in tariff as well as superior digital play in the medium to long term, it said
CLSA said Bharti’s 60 per cent entry prepaid tariff hike (by discontinuing Rs 49 recharge) might impact 55 million of its 321 million subscribers and boost its India mobile revenue and ebitda by 4-7 per cent, in addition to giving a 1-2 per cent lift from recent postpaid-plan changes. “… we forecast a 17 per cent CAGR in consolidated Ebitda by FY23,” the brokerage said this month.
It was also bullish on SBI Life, calling it a preferred insurance pick due to best-in-class distribution, cost ratios and lever for value-of-new-business margin surprise.
Phillip Capital said access to the untapped client base, industry-leading cost structure and improvement in persistency should continue to drive growth and profitability for SBI Life. This brokerage has revised its target for the stock to Rs 1,200 from Rs 1,100 after the company’s June quarter results. The stock traded at Rs 1,139.25 on Monday against its record high of Rs 1,175.50 on August 5.
