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Macquarie’s top 10 picks for India in a bear market

India’s benchmark indices are trading more than 30% off their record highs, as investors are concerned about the economic damage of the lockdown.

ET Bureau|
Last Updated: Apr 07, 2020, 08.59 AM IST
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HCL has low exposure to BFSI and diversified business mix
Macquarie is finding value in select pockets of the market even as Indian equities remain in a bear market. India’s benchmark indices are trading more than 30% off their record highs, as investors are concerned about the economic damage of the lockdown. However, the brokerage has picked out 10 stocks using a bottom-up approach. ET details Macquarie’s top picks:

GAIL INDIA

  • Share price building in extreme pessimism
  • Stock is trading around 50% below fundamental bear case valuation
  • Macro is tough but LNG contract flexibility under-appreciated

CIPLA

  • Steady growth visibility, recalibrated capital allocation and attractive valuations are key positives
  • Expect Cipla to resume niche US launches in next few weeks
  • Being well-positioned to monetise its respiratory portfolio in developed markets is a structural opportunity

PETRONET LNG

  • See short sharp volume recovery post lockdown
  • Stock trades below fundamental bear case fair value, providing ample margin of safety
  • Continue to see Petronet LNG as a steady compounder with 10% plus compounded EPS growth

HDFC BANK

  • Even in bear case, if 12% loan growth post Covid-19 for FY21 is assumed, stock still offers 30% upside
  • There will be job losses due to Covid-19 but willingness of customers to repay money is good

HINDUSTAN UNILEVER

  • Home care can benefit in the nearterm due to stockpiling
  • See long-term positive trends in personal wash and packaged/nutrition foods
  • GSK merger provides strong platform to grow foods portfolio, would be EPS accretive from FY21

INFOSYS

  • Successful execution of new CEO’s strategy has led to faster organic growth rate versus industry
  • Even with single-digit revenue fall in FY21, EPS decline would be less than 10%
  • Company has strong net cash balance sheet and 4.7% dividend yield

ICICI BANK

  • Stock offers 50% upside even after factoring 8.5% loan growth for FY21 in bear case scenario
  • Expect delinquencies in retail portfolio to be contained
  • Lower portion of business banking portfolio versus peers would keep credit costs in check

HCL TECHNOLOGIES

  • HCL has low exposure to BFSI and diversified business mix
  • Strong net cash balance sheet provides support

ULTRATECH CEMENT

  • Stock warrants sustainable premium due to 20% plus market share, diversified presence, strong brand and distribution network
  • Estimate net debt to fall to $1.1 billion as operating cash flow improves

DR REDDY’S LABORATORIES

  • Expect double digit earnings growth over FY21-FY22 even without big ticket US launches
  • See medium-term growth momentum in Europe staying strong

8 top money making ideas for next few weeks

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Money making ideas

6 Apr, 2020
The BSE benchmark Sensex lost over 2,200 points last week, while Nifty sank nearly 7 per cent during the holiday-truncated week.With two trading holidays on Monday and Friday, experts on Dalal Street expect the market to attempt a technical pullback.With this backdrop, here are eight money making ideas charted by technical analysts that can deliver solid gains over the next few weeks.
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