Axis Securities leaves out Infosys; Aarti Drugs, Gland Pharma among fresh top picks for May

Indian markets showed strength in April and witnessed a broad-based recovery in which all sectoral indices closed on a positive note except the IT index.

The biggest recovery was seen in realty, PSU banks, and auto stocks, while the IT sector underperformed the broader market due to a weaker set of earnings in the fourth quarter.

In line with this, Axis Securities' top picks' basket delivered returns of 3.6% in April. Benchmarks Sensex and Nifty were up just over 3% in the same month.

Moving forward, the brokerage expects the current earnings season to drive the market direction, and hence the fourth quarter results will remain critical at this juncture.

Currently, 52% of NSE 500 stocks are trading above 200 DMA against the long-term average of 53%, indicating markets have successfully bounced back from the oversold zone.

However, disappointing earnings and poor outlook from the IT heavyweights meant that the growth for these companies would likely moderate in the current fiscal.

"The IT sector would be in a ‘wait and watch’ mode, especially given the concerns in the global market," Axis Securities said.

On the other end, financials have been holding the fourth quarter performance and accounted for most of the incremental growth in the corporate earnings.

The upgrades in BFSI have been compensated by the downgrades in the IT sector, the brokerage said, while estimating the December 2023 Nifty target at 20,400. This values the index at 20x on December 2024 earnings, implying an upside of 13% from the current levels.

"While the medium to long-term outlook for the overall market remains positive, we may see volatility in the short run with the market responding in either direction. Keeping this in view, the current setup is a ‘buy on dips’ market," Axis Securities said.

Considering all the factors, the brokerage has made some changes to its top picks' basket, which offered 14.4% returns in the last year period, removing Infosys, Tech Mahindra, and Healthcare Global Enterprises. Some new additions include Aarti Drugs, Gland Pharma, and Mahindra CIE, on account of their improved outlook.

The top picks basket currently comprises ICICI Bank, Maruti Suzuki India, State Bank of India, Dalmia Bharat, Federal Bank, Varun Beverages, Ashok Leyland, PNC infra, ITC, Aarti Drugs, Gland Pharma, Mahindra CIE, Praj Industries, CCL Products (India), Polycab India, and Bajaj finance.

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