HDFC Bank, L&T Finance Holdings are top picks: R Sreesankar

R Sreesankar of Prabhudas Lilladher is of the view that HDFC Bank and L&T Finance Holdings are the top picks.

R Sreesankar of Prabhudas Lilladher told CNBC-TV18, "We continue to have our top pick as HDFC Bank. That has been there as a top pick for almost three years right now. It continues to be there."

"State Bank of India, IndusInd Bank and Kotak Mahindra Bank has been our top pick and we still continue to hold on to those top picks."

"We have L&T Finance Holdings as one of the NBFC which is there in the top picks and we continue to have it. We still continue to like that stock."

Expect 8-10% rally in HPCL, BPCL; ITC may head to Rs 315-320: Ashwani Gujral

Ashwani Gujral of ashwanigujral.com is of the view that HPCL and BPCL may rally by 8-10 percent while ITC may head towards Rs 315-320.

Ashwani Gujral of ashwanigujral.com told CNBC-TV18, "Oil marketing has gone through a decent correction. Even while the market was coming down, HPCL was moving up, so risk reward is extremely favourable. Similarly, ITC came off a little bit. But again, it was showing strength going to the close. The stock is looking likely for Rs 315-320. Similarly both HPCL and BPCL, look like they are in for an 8-10 percent rally."

ITC closed at Rs 281.05, up Rs 3.15, or 1.13 percent. The share touched its 52-week high Rs 291.95 and 52-week low Rs 212.88 on 07 February, 2017 and 06 May, 2016, respectively.

Buy Sundram Fasteners, Jindal Steel & Power, DCB Bank : Ashwani Gujral

Ashwani Gujral of ashwanigujral.com suggests buying Sundram Fasteners, Jindal Steel & Power and DCB Bank.

Ashwani Gujral of ashwanigujral.com told CNBC-TV18, "Sundram Fasteners is a buy with a stop loss of Rs 376, target of Rs 394. Jindal Steel & Power (JSPL) has had a large rally, metals are bit weak, so that is a sell with a stop loss of Rs 131, target of Rs 120. DCB Bank after a big rally is showing some corrective zone. So that is a sell with a stop loss of Rs 164, target of Rs 152."

"Basically, the newsflow in telecom stocks is over and not only, Idea Cellular, Bharti Airtel, etc - it is not like they will merge and suddenly become very profitable companies. The road ahead is pretty murky. So, today is a good time to get out of telecom stocks, maybe even go short at Idea because I think it will again get back to those Rs 75-80 zones. So, telecom stories for the moment seems over," he added.

Buy Infosys, HCL Technologies: Sudip Bandopadhyay

Sudip Bandopadhyay, Market Expert told CNBC-TV18, "I have been positive on Infosys   even when the whole market was kind of negative. I think we got too much carried away by quarterly result expectations of analysts. It is a fundamentally strong company. They have been tweaking their model to get into IOT, artificial intelligence, digital and have been doing it pretty systematically." "Of course, going forward, US visa costs may go up, but that we believe will more than get compensated by currency depreciation, which we are witnessing currently. So, Infosys definitely is a good buy at current level," he said. "I would also flag off HCL Technologies   for the investors, again it is a great buy, business is rock solid, lot of good things they have done - acquisition of Volvo business unit and setting up a unit in Estonia. All these are excellent steps which will pay them handsome dividends. At current level, I think even HCL Technologies is a good buy."

Hold IRB Infrastructure, says Sharmila Joshi

Sharmila Joshi of sharmilajoshi.com told CNBC-TV18, "The situation that we have on hand where you don't have to pay toll at a lot of places has created a situation where there is a loss to companies like  IRB Infra   which in fact collect toll. If I remember correctly, the figure I had read 4 or 5 days back was Rs 462 crore or in that vicinity. We don't know how they are going to be repaid, how they are going to be compensated etc which definitely means that this quarter is not going to be a great quarter for IRB Infra." 

"However, once this period is over there should not be any real change in the kind of earning visibility that a company like IRB Infra will have for the simple reason that it will be back to business as usual for them while lot of other sectors may actually face the pain of seeing lower off take, lower demand etc. So, from that point of view IRB Infra is okay." "Also we have been hearing that NHAI has been talking of more orders etc. So, from that point of view also within the infra space, I think the road space will be the first to see more orders when government spending sort of picks up in the next couple of months. So, if one is a longer term investor you should stay invested and maybe one can try and average it if you do see the market overall correct more," she added.

Buy cement stocks, advises Ambareesh Baliga

Ambareesh Baliga, Independent Market Expert told CNBC-TV18, "I think it is a good time to buy cement and that is what I have been saying now for the last week or 10 days that get into cement because these stocks have fallen again because of demonetisation, the affect on real estate." "However, then we should remember that finally the government would be richer at the end of this demonetisation exercise and to kick start the economy they will start spending on infrastructure. 

That is when you will again see a decent boom happening in the infrastructure space," he said. "I am sure there would be decent sops for the housing sector in the Budget because that is another way to kick start the economy. So, from that point of view o think after a lull of possibly 2 or 3 months, you will again see the cement sector booming again. So, this is again the right time to start looking at cement especially stocks like UltraTech Cement   and Ambuja Cements   which has corrected decently well."

Sell Ramco Cements; target of Rs 521: SPA Financial

Ramco continued to report impressive set of numbers backed by improving volumes and better operating efficiency. While improving demand scenario in AP & Telangana region resulted in 18.9% YoY growth in volumes, EBIDTA/tonne improved by INR 96/tonne to all time high of INR 1509/tonne (amongst the best in industry). Profitability was further boosted by 38.3% YoY decline in interest expenses owing to INR 3.5 bn of debt repayment in H1FY17. Although Ramco remains one of the best bets to play the cement demand recovery theme across South India, we change our rating on the stock from "HOLD" to "SELL" with a target of INR 521, as current valuation factors in most of the positives. Ramco remains one of our best mid cap bets to play to the cement demand recovery theme in South India. Superior operating profitability, dominant market share backed by strong brand recognition ensures buoyant growth prospects for the company. Having split grinding unit near to high consumption markets minimizes transportation costs and helps in timely servicing of the demand. However despite all these positives, we change our rating on the stock from “HOLD” to “SELL” with a target of INR 521 (based on an avg. of 10x FY18 EV/EBIDTA & FY18 EV/tonne of INR 7475), as valuation of 11.7x FY18E EV/EBIDTA & EV/tonne of INR 9046, factors in most of the positives.

Buy VA Tech Wabag; target of Rs 781: SPA Financial

VA Tech Wabag reported better than expected set of numbers aided by improved performance from standalone operations (57.7% of revenues). Consolidated revenues grew by 31.2% YoY led by 38.2% YoY surge in standalone revenues & 22.7% increase in overseas revenues. Margins deteriorated by 46 bps YoY to 7.4% led by 92 bps decline in overseas margins. Wabag bagged orders worth INR 7167 mn in Q2FY17 leading to total backlog of INR 70653 mn (book to bill of 2.5x). 

Long term story in Wabag continues to remain intact with rising focus on clean water for drinking as well as better effluent treatment. We retain our BUY rating on the stock with a target of 781. WABAG with presence across the value chain of water spectrum is the best play on water scarcity theme. Superior return ratios (RoCE of +19%), cash rich balance sheet, asset light business model and technological & locational advantage places it above its peers. Long term opportunity remains immense in Wabag as upcoming opportunities of over INR 700 bn, alone would more than double its order backlog, even if Wabag maintains a strike rate of mere 10%. We continue to retain our BUY rating on the stock with a target of 781 based on 22x FY18E earnings.

Buy ICICI Bank; target of Rs 338: KR Choksey

Reporting mixed set of performance in Q2FY17, ICICI Bank PAT at INR 31 bn stood sequentially higher largely supported by one-off gains from to the tune of INR 56.82 bn emerging from IPru stake sale that helped beef up provisions against elevated asset quality stress. The stringent balance sheet repair put up elevated slippages at INR 80 bn for second consecutive quarter; however, watch-list exposure declined 16% Q-o-Q to INR 324.9 bn . 

Consequently, the overall stressed assets too tapered down; declining to 10.4% of overall asset base. While the provisioning for the quarter stood exceptionally higher (182% Q-o-Q increase), the bank made additional provisions towards standard loans, loss NPAs and floating provisions and stands adequately provided on the wage related front. While the flat NIMs (3.1% - Q2FY17) and higher delinquencies impacted NII, the improvement in portfolio mix (53% emerges form retail/MSME), strong retail lending accretion (21% Y-o-Y growth), cost efficiencies and significant capital on balance sheet with sufficient cushion from value unlocking in subsidiaries should aid ICICI Bank to put up improved operating metrics ahead. 

UPGRADE BUY. Q2FY17 performance stood mixed with headline asset quality standing elevated; yet receiving major support from the one-off stake sale gains. However, higher provisioning for contingent times coupled with stringent balance sheet repair and ameliorating retail franchise are key positives for the strong operating show ahead. While the asset quality disappointment was on expected lines, reduction in watch-list exposure and resultant decline in overall stress loans coupled with huge provisioning buffer brings respite. While asset quality is not yet out of woods, the improvement in portfolio mix, strong retail lending accretion, cost efficiencies and significant capital on balance sheet with sufficient cushion from subsidiaries should aid ICICI Bank put up consistent quality show on operating metrics.

Buy Bajaj Finserv; target of Rs 3500: Dynamic Levels

Over the last few years, BFL has established itself as one of the premier non-banking financial companies (NBFCs) in India. It has consciously built a diversified lending business covering retail consumers, small and medium enterprises and commercial borrowers. The business model of BFL is built on well-defined customer segmentation, multiple product offerings and extensive use of data analytics within a robust risk management and operational excellence framework. BFL had a strong year aided by a diversified product mix, robust volume growth, prudent operating cost management and low NPAs. With assets under management of 44,229 crore, BFL has emerged as one of the leading NBFCs in the country. We initiate coverage Bajaj Finserv as a BUY @2900 with a target of Rs 3500 representing a potential upside of 20% from the buy price, Bajaj Finserv share price is trading at a PE of 22.49.

Buy Lupin; target of Rs 1769: KR Choksey

Lupin’s Q2FY17 revenues were in-line with our estimates. Revenues grew by 32% YoY to INR 42.1 bn (as compared to our estimate of INR 41.9 bn). US business posted robust growth of 70% YoY and de-growth of 9% QoQ in USD terms from USD 172mn in Q2FY17 to USD 292mn in Q2FY17 (and USD 322 mn in Q1FY17) on account of robust sales from gGlumetza and limited competition gFortamet. Lupin launched 2 products in the US market. Indian business posted a healthy growth of 12.1% YoY to INR 10 bn on account of seasonality. 

South African sales grew by 27% YoY to ZAR 252 mn. Germany sales grew by 31% to EUR 6.4 mn and Philippines sales de-grew 16% to PHP 448 mn. Latam region de-grew by 9% to INR 1 bn with Brazil growing by 11% to BRL 31 mn and Mexico posting de-growth of 32% YoY to MXN 93 mn. Japanese sales were up 10% YoY in Yen terms to JPY 6.7 bn and 35% YoY in INR terms to INR 4.4 bn. EBITDA for the quarter stood at INR 10.3 bn up 55% YoY with EBITDA margins at 24%. R&D as a % of sales was at 13.6% at INR 5.7 bn. 

PAT for the quarter stood at INR 6.6 bn up 58% YoY on account of lower tax rate. We remain confident on Lupin’s ability to generate superior returns, sustain robust revenue growth over FY16-18E on account of a high quality and loftier US pipeline through Gavis acquisition coupled with risk mitigation strategy employed in form of tech transfer and enhanced remediation efforts for its Goa facility; successful integration of Gavis into Lupin’s pipeline and enhanced footprint in the Japanese markets. 

We maintain our rating of ‘BUY’ valuing the company at a higher multiple on account of enhanced R&D initiatives, robust US pipeline and a robust growth trajectory across all key markets. We reduce our earnings estimate by our 14% / 5% for FY17E/FY18E EPS respectively on account of slower than expected ramp-up in Gavis portfolio and higher competition in key products; with a revised target price INR 1,769 (earlier INR 1,863) at 24xFY18E EPS of INR 74.

Accumulate PNB; target of Rs 140: Prabhudas Lilladher

PNB’s Q2FY17 performance was better than expectations with PAT of Rs 5.5 bn. The bog positive came in from slippages rate trending downward coupled with strong efforts on recovery/upgrades beginning to pay off while keeping the asset quality stable. 

Provisions continued to remain high but were offset by higher treasury gains during the quarter. Recoveries continued to be from small/medium accounts with management guiding for recovery of another Rs 100 bn in H2FY17 v/s Rs 107 bn in H1FY17. 

We have slightly fine tuned our estimates on equity infusion by GOI of Rs 21.0 bn, while also adjusted movement of NPA. Strong recovery/upgrades especially from large a/c can provide delta on asset quality, while operational improvement seems to be on track. We are Upgrading to Accumulate with revised PT of Rs 140 (from Rs 80).

Buy CEAT; target of Rs 1445: Prabhudas Lilladher

Prabhudas Lilladher's research report on CEAT While Ceat reported a YoY decline in its standalone earnings in Q2, the dip was lower than our expectation. The relatively stable input costs and increase in share of more profitable products in its mix would have a positive impact on Ceat’s performance. 

Revenue growth is also expected to be better with higher demand for two‐wheelers and UVs and capacity constraints would be addressed by its ongoing expansion. Higher profitability and increase in cash flow generation would result in an improved balance sheet position from FY18. We maintain a “BUY”, while retaining our estimates and target price.

Buy pharma stocks: Ambit

Speaking to CNBC-TV18 Pramod Gubbi of Ambit said that the pharma sector will be under pressure. He said pharma has been neglected or has underperformed. Given how things are changing from an investor perspective, they are looking at it as value buy, he said, adding that there won’t be any fundamental changes in terms of the outcome of the US elections. There is a need for Indian companies to move up the value chain and several of them are doing, he said.

Much like pharma, the tech sector is also going through a consolidation after having a good 3-4 years until 2014, he said. There is usually a lag in the advances seen in Indian companies, but they do catch up, he maintained.

It is difficult to gauge the extent of the fall in global markets if Donald Trump wins, he said. There are leveraged positions in the market. Having said that we see that as a buying opportunity, he said. “We don’t see any material changes given the American political and democratic system in terms of checks and balances.”

Sell UPL: East India Securities

UPL posted gross revenue growth of 19% in Q2FY17, mainly on account of strong volume growth of 23% during the quarter. There was a price decline of 5% while exchange impacted positively by 1%. Total net revenues grew by 26% during the quarter. Geographically, India/Latin America contributed highest to the growth with 23%/34% respectively. 

Seed business witnessed a revenue growth of 23%. UPL’s Q2FY16 results were marginally below our estimated. UPL is a leading global generic player in the agrochemical Industry (ranks among the Top-5 post patent agrochemical manufacturers in the world). We expect UPL sales to register CAGR of 14.5% over FY2016-18E, while Adj PAT is likely to show a CAGR of 20.2% during same period. 

Over past few quarters, UPL has seen a strong revival in volume growth, with improving gross margin. At current price stock is trading at 25x & 20x its FY17E & FY18E earnings respectively. Due to recent run up in the price, stock trades near to its fair value, hence we rate stock Sell with TP of Rs 688 per share.

Sell Rallis India: East India Securities

Rallis, on standalone basis, posted growth of 17.8% in Net Sales for the quarter, as domestic business picked up on back of strong monsoon and spillover of export order from previous quarter. Domestic business was struggling on account of two back to back droughts and high channel inventory. Other business (majorly seed) posted strong growth of 66% for the quarter. Rallis’s Q2FY17 numbers were in-line with our expectation.

 Even thought Rallis has one of the best distribution network, company seems to be unable to capitalize on it. Given stellar performance by peers, Rallis’s lowering innovation index and declining growth in domestic business indicate urgent need for business restructuring & focus. 

Overall, we estimate Rallis to register a CAGR of 9% in Net Sales and Profit over FY2016-18E, respectively. On the valuation front, the stock is trading at 29x & 26x FY2017 & FY2018 Estimated Earnings. We recommend Sell on stock with a Target Price of Rs 223.

Buy granules india: Nirmal Bang

Granules India posted subdued sales growth of 3% yoy to Rs 363.6 cr for the quarter, due to capacity constraints in Paracetamol and Metformin however EBITDA margins improved by 100 bps on account of favorable product mix leaning towards formulations (37% of sales vs 29% in Q2FY16). 

The company posted EBITDA margins of 20.4% vs 19.4% in Q2FY16 and vs 19.6% in Q1FY17. The company is undergoing capex program (earmarked Rs 314 cr for FY17 and similar number for FY18) for increasing the capacities in addition to greenfield facility at Virginia. Increased capacities are likely to be operational by FY17 end or early FY18. 

Management has maintained revenue growth guidance of 10-15% for FY17. In last 5 years the company has shown robust growth and grew at CAGR of 24.7% with PAT CAGR of 41.5%. For the next two years we expect the company’s sales to grow by 14% and PAT by 28%, due to higher profitability in Omnichem and higher contribution by formulations business. 

We believe current year is an year of consolidation wherein it is making all possible efforts to prepare a base for future growth momentum. We have assigned a multiple of 18x FY18E earnings and based on that we recommend BUY on the stock for price target of Rs 156.

Hold Hcl Infotech & M&M: Prakash Gaba

Prakash Gaba of prakashgaba.com told CNBC-TV18, "Nifty had seen a low at 8400 zones. If we get rallies, those would be shorting opportunities, unless 8550 is taken on the upside you must assume that any upmove that we may have would be shorting opportunities and the downside is open." 

"I like two stocks - HCL Technologies   looks certainly good and can climb to levels closer to around Rs 820 zones. I would have a stop loss below Rs 775 and trade long. Mahindra & Mahindra (M&M) is also looking good with targets of Rs 1,420-1,450 zones and stop loss below Rs 1,350. It may take some time for that, but that's the target," he added.

Buy stocks of Ashok Leyland: Ashwani Gujral

Ashwani Gujral of ashwanigujral.com told CNBC-TV18, "Nifty and the Bank Nifty continue to remain in a longer term correction. 

Whatever way the event pans out, the big buying opportunity will come as the market moves higher, for the moment I don’t think there is great positional trade on the Nifty or the Bank Nifty, wait for the event outcome and then try to get long." 

"There is great risk reward now on Ashok Leyland   where a medium target of Rs 120 is now visible. Infosys   is getting closer to Rs 950-970 and getting ready for a pullback rally. In fact the entire IT sector out there could see pullback rally with Infosys right up to Rs 1,080-1,100. Also, Axis Bank   which had a sharp correction in any sort of pullback could also have a medium target closer to Rs 600," he said.

Buy Divis Labs; target of Rs 2050: ICICIdirect

"Divis Lab has remained near Rs 1700 levels since the last couple of months. The traders who tried to go short in the stock are slowly exiting from their positions as the stock is reverting after remaining sideways for sometime. The stock also absorbed the recent losses in Nifty when the index fell from 8630 to 7970. 

During this period Divis Lab fell only from Rs 1680 to Rs 1640. It shows inherent strength in the stock and it is likely to move up as the index has finally shown signs of revival." "The current OI in the stock is one of the lowest seen in the last 3 months. Since the October expiry, the stock has remained subdued after hitting Rs 1875 levels. Initially there was long liquidation as open interest witnessed closure of over 7%. 

Post this closure, there was short addition of over 35% in a span of 2 trading sessions in the price range of Rs 1800-1840. Later the stock fell till Rs 1650-1700 and stuck up in this range since the month of November.

Buy Divis Lab in the range of Rs 1710-1735, target price: Rs 2050, stop loss: Rs 1556", says ICICIdirect.com research report.