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Abhijeet Bora, an analyst from JM Financial Services Ltd., has shared his top 10 Diwali stock picks, encompassing large, mid, and small-cap companies. He believes that these stocks offer attractive valuations and growth potential in the current market environment. Bora's picks include Reliance Industries, Power Grid, Jindal Steel, Bajaj Finance, Gravita, and Ashoka Buildcon, among others. He explains his rationale behind selecting each of these stocks, highlighting key factors driving their potential future performance.
Bora anticipates a 7-8% earnings growth for Nifty 50 companies in fiscal year 2025. While he acknowledges that some sectors like metals and oil & gas have faced downgrades, the overall market expectation is aligning with single-digit growth. This, he believes, implies that returns should be in line with earnings growth, potentially leading to further correction in the broader markets. He cautions that margins remain volatile across sectors, leading to an earnings growth mirroring revenue growth.
Bora's top pick, Reliance Industries, is expected to benefit from a recovery in GRMs (Gross Refining Margins) to a normalized level of $6-$7 per barrel. He explains that the company's O2C (Oil to Chemicals) business, typically contributing around 62,000 crores in EBITDA annually, has experienced a significant earnings cut due to lower GRMs. Additionally, the retail sales in Q2 showed muted growth. However, Bora expects the GRMs to recover, leading to an improvement in O2C performance. He also highlights the potential growth opportunities presented by Reliance's new energy business.
Bora's other notable pick, Jindal Steel & Power (JSPL), is favored for its focus on flat products, which command better pricing, and its commitment to backward integration. JSPL aims to achieve near-complete coal procurement from captive sources and 60% iron ore procurement. This strategy is expected to enhance the company's value-added mix and drive margin expansion. Bora expects margin improvement with the ramp-up of new capacities, which will increase JSPL's capacity by 65% to 16 million tonnes. He believes that the potential margin recovery, coupled with the company's strategic moves, will significantly rerate JSPL, driving a 50-60% increase in EBITDA from FY24 levels.
Bora's analysis highlights the potential opportunities and challenges facing the Indian stock market. He emphasizes the importance of considering valuations, growth prospects, and sector-specific trends when making investment decisions. While his Diwali stock picks offer potential for gains, it is essential for investors to conduct thorough research and consult with a financial advisor before making any investment decisions.
Source: Abhijeet Bora's top 10 Diwali stock picks from large, mid, and small caps