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    Diwali Picks: 5 themes Neeraj Chadawar is betting on for Samvat 2079

    Synopsis

    “We believe that the FMCG space provides a greater margin for safety and one could make 12-15% from current level also and that is under our consumption space. Under consumption, we also like the QSR space. It is a very good category which has delivered superior returns in the last couple of years and we are betting on Westlife Development under the QSR.”

    Neeraj Chadawar-1200ETMarkets.com
    "In the largecap space, we are betting on ITC. ITC has given a stellar return in CY22 and we believe that the returns for ITC will continue for here onwards also. It is firing on all the cylinders. The core business cigarette is doing well and along with that, all the other categories in terms of hotel and leisure, agri and all other categories are also picking up," says Neeraj Chadawar, Head - Quantitative Equity Strategy, Axis Securities.

    You have released a report regarding your top Diwali picks. Can you talk about a few of the largecaps and a few of the midcaps?
    We have released our report yesterday and we believe that the relative performance of the Indian equity market will continue for the next Samvat. Last Samvat was a very volatile one. We have seen a lot of volatility in the last one year and even with that volatility, the Indian equity market has outperformed the global as well as the emerging markets.

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    This is led by the resilience of our Indian economy and we believe that this resilience will continue for the near future and based on that, we have categorised multiple themes for Samvat 2079.

    In the largecap space, we are betting on ITC. ITC has given a stellar return in CY22 and we believe that the returns for ITC will continue for here onwards also. It is firing on all the cylinders. The core business cigarette is doing well and along with that, all the other categories in terms of hotel and leisure, agri and all other categories are also picking up.

    We believe that the FMCG space provides a greater margin for safety and one could make 12-15% from current level also and that is under our consumption space. Under consumption, we also like the QSR space. It is a very good category which has delivered superior returns in the last couple of years and we are betting on Westlife Development under the QSR.

    We believe that Westlife has enough levers to deliver growth in upcoming years in the high growth QSR industry and the company has also raised the guidance for opening the store in next couple of years. Every year, they are opening 40 to 50 stores per year versus the earlier 20 to 30 and we believe there is strong SSG. There is an opportunity in this segment in the post Covid world when other restaurant categories have closed up.

    We believe that this is the fastest growing category and we are betting on that category and one could make a good amount of money in the next one year.

    Apart from that, banking is one of the themes one can look out for in 2023. We are seeing credit growth picking up and now the entire banking system is in a good shape as compared to what it was two years back. In our Diwali picks, we have recommended IDFC First Bank. We recently initiated this stock with a target price of Rs 70. We believe that the IDFC First Bank is poised for growth in the upcoming quarter.

    We have seen asset quality improvement in the last six quarters and we believe that this trend will continue for the upcoming quarter also and based on the strong CASA ratio, credit growth is likely to be double digit around 20 to 25% in the next couple of years. Based on that, return ratios will improve for IDFC First Bank and this is a good candidate for rerating in 2023.

    Along with that, we are very bullish on the CV cycle, we are seeing the early signs of the CV cycle. This CV cycle is likely to sustain in 2023 with a push from the government in terms of infrastructure, in terms of revival in the economic activities. We are very bullish on Ashok Leyland in the CV space along with Sundaram Finance as an NBFC which has shown a very good result in Q1. The disbursements were at an all time high level and are picking up across the board. The CV space is also getting good demand. We believe that this space could give a good return in the next one year.

    Along with that, one very interesting pick is NOCIL. It is a one stock shop for the tyre manufacturer and for fulfilling the chemical needs. Now the production numbers for domestic OEMs are improving and that is translating into a higher tyre demand. We believe that this is a good time to get involved in NOCIL.

    In Q1, NOCIL has reported one of the best quarterly numbers in terms of revenue also and we believe that company has had enough levers to increase production. Right now, capacity utilisation is at 75% and we believe that the end user demand is improving at a higher rate and along with that, replacement demand in tyres is also kicking in.

    All this is translating into better profitability for Nocil in coming years and with the pick-up in CV cycle, this will be a play on the next leg of growth for Nocil from a 1-2 years’ perspective. Along with that, we are seeing the signs of recovery in the travel and tourism space, especially after the vaccination drive and we believe that this space is very attractive compared to what we have seen a couple of years back. This space is gaining momentum, occupancy is improving across the board and based on that, we have added Indian Hotels in our Diwali Muhurat pick recommendations.

    We believe that Indian Hotels is gaining market share. As they are turning their model into a non-cyclical one, they will attract more ROE in the coming years. That is what we are betting on. So we are betting on five themes for Samvat 2079 and we believe that these themes could deliver a good return in the next one year perspective.

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



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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