Axis Securities picks 15 stocks that can return up to 36% by December 2021

Axis Securities sees Nifty heading to 17,200 by December 2021 on hopes of a rebound in corporate earnings. The benchmark equity index has already rallied 91% to 14,919 from its 52-week lows of 7,511 witnessed in March last year.

The brokerage believes fundamentals are getting better for long term equity investment in India which is attracting liquidity driven by foreign institutional investors (FIIs) with positive inflows. Although all the major emerging market countries have been witnessing inflows since November, the quantum of flows into India was better than others.

Overseas investors have poured Rs 2,56,228 crore in equities since the beginning of FY21. Considering the present market scenario, the brokerage is bullish on ICICI Bank, Manappuram Finance, Canfin Homes, Federal Bank, Bharti Airtel, HCL Technologies, Tech Mahindra, Varun Beverages, Relaxo Footwears, Amber Enterprises, NOCIL, Endurance Technologies, Steel Strip Wheels, Lupin and JK Lakshmi Cement with an upside of up to 36%.

The brokerage further highlighted that a closer look at the earnings upgrade for FY21and FY22 indicates that the bulk of the upgrades have come from core sectors which include 50% earnings upgrade for the metals sector for FY21.

“We have also upgraded by FY23 earnings forecast 7% translating to Nifty earnings of Rs 780. Our December Nifty target also moves up by 7% to 17,200,” Axis Securities said, adding BFSI has also seen double-digit upgrade and so has the cement sector.

Since December 2017, Nifty has delivered a return of 40%. Out of which, the top 10 stocks by free-float market cap have delivered a stellar return of 56% while the remaining 40 stocks had delivered only 16%.

“This divergence has started narrowing in recent months, based on the top 10 stocks the adjusted Nifty value works out to 16,451 while the remaining 40 would lead Nifty to just 12,219. This indicates Nifty is better valued
beyond the top 10 names. Long term risk rewards are better in the next 40 names vs the top 10,” Axis Securities said.