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Over 6 months, the Nifty 50 index has risen by more than 12% and market positioning has slowly shifted to defensive and selective circular play.Image: Reuters
According to Axis Securities, the NSE Nifty 50 Index is expected to reach the 17,700 level by December 2021. This is because rangebound volatility suggests a strong bullish continuation. The brokerage firm has upgraded its December 50 Nifty target from 17,400. In August 2021, the volatility index India VIX traded at 13 levels, below the long-term average of 22. This suggests a positive setting for a market with a limited downside. Axis Securities believes that if VIX continues to fall, it will cause further gains in the broader market. Since November 2020, mid-cap and small cap stocks are gaining momentum, reducing economic uncertainty and volatility and are expected to record strong returns in 2021.
Over six months, the Nifty 50 index has risen by more than 12%, and since February 2021, market positioning has slowly shifted to defensive and selective circular play that outperformed delicate sector play. Axis Securities has offered to buy some financial stocks that could raise 500 points from current levels and yield up to 30% return. FCMs remain optimistic in the market and believe that focusing on maintaining profits will be the key to the future.
Top 4 financial stocks to buy
ICICI Bank
Purchase, CMP: Rs 719.20, Target: Rs 810, Upside: 13%
Axis Securities expects ICICI Bank shares to rise 13%. We believe that a strong reserve buffer, coupled with increased loan growth, improved operating profit and a strong deposit franchise, will help expand ROAE / ROAA in FY22-23E. Key risks include a significant decline in the quality of retail assets and delayed resolution of stressed assets.
State Bank of India (SBI)
Purchase, CMP: Rs 430.90, Target: Rs 555, Upside: 28.8%
SBI stocks need to jump nearly 30% from current levels to reach the target price pegged by the brokerage firm. SBI considers it the best play among PSU banks in the gradual recovery of the Indian economy, given its sound PCR, strong capitalization, strong debt franchises and improved asset quality outlook. “We are confident that normalizing credit costs and improving operational performance will result in double-digit ROE of 13-15% by 22-23E,” said Axis Securities.
Federal bank
Purchase, CMP: Rs 82.40, Target: Rs 100, Upside: 21.4%
Federal banks are carefully building loan structures for high-rated corporate and personal loans. The main benefits are increased retail attention, strong commission income, proper capitalization, and careful provisioning. Key risks include asset quality trends over the coming quarter and loan growth prospects.
Equitas Small Finance Bank
Purchase, CMP: 62.65, Target: Rs 76, Upside: 21.3%
FCMs believe that Equitas Small Finance Bank will be subject to rerating due to improved profitability, asset quality and rate of return. Recently, the bank approved a scheme for a merger (reverse merger) with a promoter (Equitas Holdings). This ensures compliance with regulatory requirements.
(The recommended stocks in this story are by their respective research analysts and brokerage firms. FinancialExpressOnline is not responsible for any investment advice. Rules and regulations apply to investing in capital markets. Please consult your investment advisor before.)
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