Nifty may touch 27,867 in a year, says Prabhudas Leeladhar, bets on BEML, HDFC AMC

Valuing the Nifty at 19.1x its 15-year average PE, local brokerage firm Prabhudas Leeladhar (PL Capital) has given a one-year target of 27,867 for the index and at 20x, a bull case target of 29,260. Other stocks like BEML, Cyient and HDFC AMC.

The large cap stocks Prabhudas Leeladhar mentioned as his conviction picks are: Ambuja Cement, Bharti Airtel, Bharat Electronics, HDFC Asset Management Company, ICICI Bank, IndusInd Bank, InterGlobe Aviation, Larsen & Toubro, Max Healthcare Institute, Mahindra & Mahindra, Reliance Industries and Titan.

The local brokerage firm believes in the following mid and smallcap stocks: BEML, Crompton Greaves Consumer Electricals, Scient, JB Chemicals & Pharmaceuticals, Jindal Stainless, Lemon Tree Hotels, RR Kabel and Safari Industries (India).

PL Capital believes that market and street estimates have already picked up strong demand during the upcoming festive and wedding season and any disappointment in demand during this period could lead to further downward revision in EPS estimates.

“The market has turned in favor of defensive sectors as valuations have become too expensive in many cyclones even after accounting for continued growth. With high growth and low risk expectations, sectors such as FMCG, IT services, pharma and consumer durables have experienced a strong rebound. Returns between large-cap and mid-cap indices have declined significantly over the last three months,” said a PL Capital report.

The difference in returns between the large-cap and small-cap indices is now less than 1% for the three-month period, although the difference remains significant over the six- and twelve-month periods.

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Capital goods, infrastructure, ports, EMS, hospitals, tourism, new energy, e-commerce and telecom are emerging sectors, if they are available at the right valuation, suggests Prabhudas Leeladhar.

The report also stated that hospital, pharma, capital goods and chemicals sectors are expected to continue strong EBIDTA growth, with auto, banks and durables also likely to post double-digit growth. Rural demand for staples shows signs of recovery, though Q2 results show some impact of prolonged rains.

Further, discretionary spending has been positive in sectors such as travel, housing, jewelery and two-wheelers, while passenger vehicles (PV), quick-service restaurants (QSR), apparel, footwear and building materials still face challenges.

Sectors such as auto, capital goods, pharma and hospitals are likely to report strong margin expansion, while margins are expected to decline in building materials, consumer, media, oil and gas and cement.

However, in a bullish scenario, PL Capital said the Nifty could trade at a 10% discount to its long-term average with a target of 25,080.

(Disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. These do not represent the views of Economic Times)