Samvat 2080: Chola Securities lists top 9 stocks for Diwali; RIL among fundamental picks, DLF among technicals

For the medium-term to longer-term time frame, the overall bias is positive for the Indian market with much upside potential visible and one can pick the quality stocks expecting good returns.

Let’s take a look at some technical and fundamental stocks for Diwali by Chola Securities. It has selected quality stocks on technical as well as fundamental parameters. It says they are well placed, indicating strength and look promising to yield good returns in the next one-year time frame.

JBM Auto: The brokerage’s first Diwali pick is JBM Auto. It has initiated coverage with a ‘buy’ recommendation on the stock at a CMP of ₹1,234 with a stop loss of 1,000 and a target price of 1,670. JBM Auto has been forming higher highs & higher lows patterns on a longer time frame, indicating an uptrend. In a medium-term time frame, there has been a formation of dragonfly doji candlestick. A reversal is on the cards and will be confirmed once the price crosses the 20 WEMA (weekly exponential moving average) of the 1250 level, it said.

DLF: Chola’s next Diwali pick is DLF. It has initiated coverage with a ‘buy’ recommendation on the stock at CMP of ₹554 with a stop loss of ₹460 and a target price of ₹700. DLF has witnessed good volumes during the period of 2020-2022. However, the stock was in a consolidation phase for consecutive months. Post consolidating, DLF has given a breakout on a long-term time frame, indicating the price to move further upwards. In the medium-term time frame, the stock has been sustaining above all the moving averages for multiple months, indicating strength, said the brokerage.

Power Grid: Its next Diwali pick is Power Grid. Chola has initiated coverage with a ‘buy’ recommendation on the stock at a CMP of ₹200 with a stop loss of ₹165 and a target price of ₹270. Power Grid has been in an uptrend since 2022, having price action which is continuously forming higher highs & higher lows patterns. In the medium-term time frame, the stock witnessed a range breakout of around ₹190 levels. Post the breakout, follow-up buying was witnessed with stable volumes, indicating strength, it said.

Axis Bank: The brokerage has initiated coverage with a ‘buy’ recommendation on the stock at a CMP of ₹989 with a stop loss of ₹850 and a target price of ₹1,300. Axis Bank has been in an uptrend, forming higher lows & higher highs on mid and long-term time frames. The price has been sustained above the moving averages since May 23. Additionally, volumes have been consistent; indicating strength. Momentum indicator like RSI is further building on strength, for new trending price upmove, added the brokerage.

Godrej properties: Chola has initiated coverage on the stock with a ‘buy’ call at CMP of ₹1,639 with a stop loss of 1,425 and a target price of 2,150. Godrej Properties is forming a reversal pattern post correcting 60% from ATH levels. The stock is presently consolidating with decent volumes. In the medium-term time frame, the price has been sustained above the moving averages, indicating strength, it said.

Fundamental Picks

Reliance Industries: The brokerage expects the net profit of Reliance Industries to compound at an annual rate of 12% to 15% over the next 3 years led by Jio Platforms, Retail & Gas division. It has assumed Jio Platforms’ expected annual profit CAGR over FY’23 to FY’26 at 20%, for Retail business at 12%, and for Oil & Gas at 15% while for Oil to Chemicals, it estimates a drop of 2% to 5% over the aforementioned period.

Hindustan Aeronautics: The company is a pure play on defence and make in India. It is sitting on a strong order book of over ₹81,000 crore with a pipeline stronger. It has a book-to-bill ratio in excess of 3x and is a net debt-free firm with shareholders enjoying a dividend yield of 1.50%. It also has strong financials ROE of +27%, and operating margins of 25% based on FY’23. Going forward operating leverage will kick in, as the capacity utilisation level will rise on the back of better execution of the order book. Profit has compounded at a CAGR of 24% over the last 5 years. The same trend is expected over the next couple of years, it said.

Poonawalla Fincorp: The company reported a very strong set of Q2FY24 numbers and the brokerage expects AUM to keep growing in the mid-teens quarter on quarter (sequentially) over FY23 to FY26. The firm’s robust advances growth is coupled with improving asset quality. In Q2FY24, GNPA was down 41 bps YoY at 1.36% and NNPA was down 22 bps YoY at 0.72 %. Also, NIM’s improved 106 bps YoY to 11.42% and ROA was up at 5%, one of the best in the industry. AUM for the firm has grown at 54% YoY and over 14% QoQ in the second quarter of FY’24 to around ₹20,215 crore. Hence, there is enough scope for rerating going forward, said Chola.

Rail Vikas Nigam: A niche play in the railway infrastructure space, the firm has been flooded with orders, on renewed government focus/spending. The company boasts of strong financials with an ROE of 20%, a sustainable operating margin of 6% to 7%. Over the last 5 years, the profit has compounded in excess of 20%, and revenue at around 22%. Its order book is in excess of Rs. 65,000 crore, having book to bill ratio of 3x, said the brokerage.

Milestone Alert!Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.

Updated: 06 Nov 2023, 04:56 PM IST