Diwali Muhurat Trading 2022: Samvat 2079 — the Hindu new year starting on October 24 — could be a test of nerves as investors brace for more uncertainty with the likelihood of a recession in the West looming over markets. Domestic brokerage house Prabhudas Lilladher in a note said that Samvat 2078 will go down in the history as one of the most volatile years where in exuberance around Tech stocks and IPO boom was followed by Russia Ukraine war, multi-decade high global inflation, and the fastest interest rate hikes in recent times.
“Amongst this hazy global scenario, India is today looking like a pearl in the ocean with benefits from food security, domestic demand-driven economy, PLI scheme across manufacturing and defence, strong banking system with decade low NPA, strong infra capex and rising investments in Unicorns,” said brokerage and research firm Prabhudas Lilladher in a note while sharing its top stock picks for Diwali 2022.
“Although the uncertain global environment and an expected slowdown in the US and Europe remain a concern, we believe India will successfully navigate this period and emerge stronger. We continue to prefer companies with a presence in emerging segments, strong balance sheets, and business moats,” it added.
Prabhudas Lilladher’s top Diwali stock picks –
Large Cap Stock Picks
Apollo Hospitals Enterprise with a target price of Rs 5,000, remains its top pick in the healthcare space; Avenue Supermart (TP: Rs 5,121) remains its top pick to play the shift from unorganized to organized market in food and grocery; Bharti Airtel (TP: Rs 1,032), ICICI Bank (TP: Rs 950) & Mahindra & Mahindra or M&M (TP: Rs 1,500) is its preferred pick in the autos space.
Mid-Cap Stock Picks
Ashok Leyland with a target price of Rs 200 as brokerage believes the company will continue to regain its lost share on the back model launches and revival in bus segment; Chambal Fertilisers & Chemicals (TP: Rs 480) & Federal Bank (TP: Rs 165).
Small Cap Stock Picks
Brokerage Prabhudas Lilladher (PL) says it prefers companies with presence in emerging segments, strong balance sheets and business moats. While the uncertain global environment and expected slowdown in US and Europe remain a concern, the broking firm believes India would successfully navigate the volatile period and emerge stronger. For Diwali, the domestic brokerage has recommended three smallcap stocks, whose price targets suggest up to 60 per cent potential upside ahead.
Jubilant Ingrevia with a target price of Rs 860, VIP Industries (TP: Rs 1,020) & Westlife Development (TP: Rs 847).
PL said Jubilant Ingrevia is well placed to capitalise on the long-term growth opportunities given its new products pipeline, traction in CDMO, import substitution, China+1 policy and commensurate capex outlay of Rs 2,050 crore over FY22-25.
The broking firm said Jubilant Ingrevia’s specialty chemicals (SPCM) segment will lead earnings growth, aided by highest capital allocation.
“It’s vertical integration across value chain drives cost and market leadership (global top 2 in pyridine-beta, vitamin B3) besides enables it to move up the value chain. Ebitda contribution from higher value segments (SPCM + NHS) is expected to increase to 67 per cent by FY25E from 53 per cent in FY22,” PL said.
The brokerage said a strong balance sheet despite nearly Rs 1,800 crore cash outflow on capex over FY23-25E; and earnings mix improvement led by higher value and structural growth segments, will drive rerating in the stock.
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