Muted market hurts analyst sentiment barometer, but Adani Ports, 2 others remain top buys

After attaining the “best performed emerging market” tag in 2022, Indian equities have turned out to be the worst performing market year-to-date.

A shift in FII money to other emerging markets that offer attractive valuations, muted December quarter earnings, and global economic risks have been the major factors behind India’s underperformance.

From the record highs, benchmark indices have corrected about 10% and this helped remove some froth over valuation. Valuations are closer to the fair value with Nifty50 trading at around 18 times its one-year forward earnings estimates.

But the weak earnings and the uncertain global environment has somewhat impacted analyst sentiment, measured by the proportion of their buy/hold/sell ratings on stocks.

The percentage of “buy” ratings moderated to 71% from 73% a year ago, while the percentage of “hold” and “sell” ratings stood at 17% and 12%, respectively, compared with 16% and 11% a year ago, showed an analysis by Motilal Oswal Securities.

Ratings on capital goods, private and public sector banks, healthcare, and real estate have been positive with their coverages also seeing an improvement. On the contrary, sectors such as metals, utilities, NBFCs, telecom and automobiles have taken a hit, with coverage on these sectors also seeing a drop.

TOP/LEAST COVERED STOCKS
Among the top 100 stocks by market capitalisation, ICICI Bank, Maruti Suzuki, Bajaj Auto, Axis Bank, and IndusInd Bank are the most widely covered stocks on the Street, showed a study by Motilal Oswal.

On the other hand, Hindustan Aeronautics, Abbott India, Max Healthcare, JSW Energy, and Yes Bank are the least covered stocks.

TOP/LEAST BUY RATINGS
Three stocks that have been unanimously given “buy” ratings by analysts are Adani Ports and SEZ, Hindalco Industries, and Max Healthcare. They are followed by State Bank of India and Larsen & Toubro, where 98% of the analysts covering them have a “buy” rating.

On the contrary, Yes Bank, JSW Energy, JSW Steel, Divi’s Laboratories, and Hindustan Zinc have the lowest percentage of “buy” ratings.


TARGET PRICES
The consensus target prices available for the Top 100 companies by market cap showed analysts see potential upside of 17% from the current free float market value. Private Banks are likely to contribute the most at 30%, followed by oil & gas at 11%, consumer at 8%, NBFCs and IT at 7% each, automobiles at 6%, and PSU banks at 5%, the report said.

Further, the top-15 stocks are projected to contribute 68% to the potential target price upsides of the Top-100 set.


In terms of individual stocks, ICICI Bank, Reliance Industries, HDFC Bank, Infosys, and HDFC are the stocks expected to contribute the most to the potential target upsides. Meanwhile, stocks with the highest target price upsides are UPL, Zomato, SBI Life Insurance, LIC, ICICI Prudential Life Insurance, and FSN E-Commerce.

Stocks with the biggest target price downside are JSW Energy, Shree Cement, ABB India, Cummins India, and Berger Paints.


(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)