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RIL, L and T, CIFC top New Year stock picks
Reliance Industries, L&T and Minda Industries, Cholamandalam Investment and Finance Company (CIFC) and KEC International among others have been recommended as the 'New Year Stock Picks' for 2020 by a leading brokerage.
An Axis Securities' report recommended stocks of firms like Reliance Industries, L&T, Cholamandalam Investment and Finance Company (CIFC), Minda Industries (MIL) and KEC International amongst others as the 'New Year Stock Picks 2020'.
Axis Securities in investment rationale on RIL said: "Reliance's (Petchem) execution of projects like ROGC, petcoke gasifiers, ethane imports, polyester expansion, coker expansion and downstream integration are expected to fetch higher gross refining margins and petchem margin than historical levels in an accelerating global growth and IMO environment.
"In case of digital business, with a subscriber additions of around 8 million per month and 99 per cent coverage, R-Jio continues to focus on market share gains, while recent announcement of tariff hike is expected to drive margin improvements."
"The new tariffs being at a discount to competitors would maintain RJio's competitive advantage. The Ebitda margin will expand in the long-term due to operating leverage in wireless, launch of high-margin enterprise business and reduction or removal of interconnect charges in the near future," it said.
On L&T, the brokerage said, "L&T's strong execution has led to revenue growth of 13 per cent at Rs 66,196 crore in H1FY20. Revenue growth was largely led by hydrocarbon, heavy engineering and services business."
"The infrastructure segment, the largest contributor to revenue, has grown steadily at 11 per cent in H1FY20 led by strong domestic growth on robust execution. Margins at 12.4 per cent in H1FY20 fell 70bps due to consolidation and higher SG&A expense in services business."
Infrastructure margin had improved in Q2FY20 by 30bps, it added.
The reported cited CIFC's healthy earnings growth, superior execution track record with sustained asset growth and control on NPAs despite sectoral headwinds for making the company as the top new year's pick.
Besides, the Indian markets had been on the rise, gaining more than 12 per cent after the corporate tax rate cuts by the government, it said.
"A large chunk of the market runup has been due to the FII inflows on the back of easing policies initiated around the same time by the central banks of developed nations; FIIs have invested around $6 billion in the last 3 months," the report said.
According to it, the markets have been polarised as few stocks have been driving the markets upwards given that the FII have limited mandate to invest beyond the large caps and quality companies.
"Investors herding into large cap, quality names have stretched the valuations of the small basket of stocks sought after by the FIIs. With index trading at near all-time highs and handful of stocks trading at stratospheric valuations, it is logical that the investments would spill over to the broader market making the rally broad-based with participation from quality midcaps," Axis Securities said.