Over 20% of stocks covered by Jefferies are trading below their lows from June’s election results.
30% of stocks are down more than 20% from their highest points this year.
With increased government spending, better seasonality, and more attractive valuations, a short-term recovery is possible.
Domestic investment flows remain strong, providing support against market downturns.
India’s PE premium over emerging markets has dropped from over 105% in September to 83% now.
Jefferies’ analysts highlight 14 stocks with strong potential: Hindustan Aeronautics, Coal India, IndiGo, Godrej Consumer, PNB, Lodha, Chola Finance, Dabur, GMR Airports, Supreme Industries, IDFC First, KEI Industries, MGL, and Honasa Consumer.
Asian Paints:
CLSA: Underperforms with a target of ₹2,290. Sales decline due to weaker consumer sentiment and underperformance compared to competitors.
Morgan Stanley: Underweight with a target of ₹2,522. Subdued demand and extended rains affected earnings, with weaker volume growth.
Nomura: Neutral with a target of ₹2,500. Volumes may improve in H2FY25, but sales and EBITDA remain flat.
JPMorgan: Downgrades to underweight with a target of ₹2,400. Missed expectations with weaker performance compared to peers.
Jefferies: Underperform with a target of ₹2,100. Q2 results were disappointing, and competition remains a concern.
Goldman Sachs on United Spirits (USL):
Initiates Buy with a target of ₹1,650 (14% upside). USL is well-positioned to benefit from premiumisation in India’s spirit market.
The potential India-UK trade deal could lower Scotch tariffs and boost growth. While near-term demand slows, growth in Andhra Pradesh is expected to offset it.
Goldman Sachs on Trent:
Initiates Buy with a target of ₹8,000 (27% upside). Zudio offers significant market share growth with low competitive risk.
Zudio is expected to grow at a 28% CAGR until FY35, potentially reaching ₹1 trillion in sales.
Westside will continue with steady growth, and Trent’s margins could improve as Zudio matures.
Star’s growth potential is lower compared to Zudio and will face competition from quick-commerce players.
State Bank of India (SBI):
Kotak: Buy call with a target of ₹975. SBI will deliver healthy returns with less concern over asset quality.
Nomura: Buy call with a target of ₹1,050. Healthy loan growth and strong profitability.
CLSA: Outperform with a target of ₹1,075. Asset quality is stable, but deposit growth needs improvement.
JPMorgan: Overweight with a target of ₹1,000. Strong performance with a solid loan growth outlook.
Bernstein: Market Perform, target ₹810. Strong EPS growth but weaker core profitability metrics.
Jefferies: Buy call with a target of ₹1,030. Stable asset quality and a need for deposit growth to meet loan targets.
Morgan Stanley on Life Insurance:
Oct-24 Update: HDFC Life and ICICI Pru Life show strong growth. Private sector individual APE grew 12% YoY, but growth slowed compared to the previous year.
Strong Growth in Private Life Insurers for October
The life insurance industry saw a 13% increase in premiums, with private insurers growing by 18%.
HDFC Life:
October Premium: +28%
7M FY25 Premium: +14%
Total APE (Oct): +23%
Retail APE (Oct): +21%
ICICI Prudential Life:
October Premium: +25%
7M FY25 Premium: +19%
Total APE (Oct): +38%
Retail APE (Oct): +22%
Max Life:
October Premium: +15%
7M FY25 Premium: +18%
Total APE (Oct): +16%
Retail APE (Oct): +15%
SBI Life:
October Premium: -4%
7M FY25 Premium: -3%
Total APE (Oct): +8%
Retail APE (Oct): +10%
LIC:
October Premium: +9%
7M FY25 Premium: +23%
Total APE (Oct): -1%
Retail APE (Oct): -15%
LIC (Life Insurance Corporation):
Bernstein: Market Perform with a target of ₹1,190. Healthy growth in new business premiums, with a strong capital market boost.
Kotak: Buy with a target of ₹1,250. Strong growth in VNB and margin improvement in non-par business.
Power Finance Corp (PFC):
CLSA: Outperform call with a target of ₹610. Loan growth is slow but improving, and the company’s valuation is attractive.
Bernstein: Outperform with a target of ₹620. Disbursement is picking up, and asset quality continues to improve.
UBS: Buy with a target of ₹670. Profit growth visibility has improved.
Ashok Leyland:
Morgan Stanley: Overweight with a target of ₹268. Volumes are expected to gradually improve, with a recovery in Q1FY26.
JPMorgan: Overweight with a target of ₹250. Margins beat expectations, and volume growth is expected in H2FY25.
Nomura: Buy with a target of ₹247. The outlook remains positive despite weak demand in the CV segment.
CLSA: Underperform with a target of ₹188. Negative outlook due to ongoing downcycle risks.
Citi: Buy with a target of ₹260. Better-than-expected margins and new product launches will aid growth.
Jefferies: Hold with a target of ₹235. Expect gradual demand recovery led by capex.
Kotak: Upgraded to Add with a target of ₹235. Gradual recovery expected from FY26 onwards.
Tata Motors:
CLSA: Outperform with a target of ₹968. JLR’s EBIT margin guidance is strong, and new launches will support growth.
UBS: Sell with a target of ₹780. Disappointing performance from JLR and CV segments, and lower FCF guidance.
Nomura: Buy with a target of ₹900. Expect a strong rebound in JLR and India CV recovery by Q4FY25.
Jefferies: Buy with a target of ₹1,000. JLR’s performance should improve in H2FY25, but the India CV and PV markets are slowing.
Info Edge:
Nomura: Buy with a target of ₹8,630. Strong performance in recruitment and real estate businesses, but lower EPS estimates for FY26-27.
Citi: Buy with a target of ₹8,850. Solid performance with continued growth in recruitment and improved billing.
Vedanta:
CLSA: Outperform with a target of ₹520. H2 expected to be better than H1, though alumina prices may weigh on earnings.
Lupin:
HSBC: Buy with a target of ₹2,400. Operational beat with better mix and cost efficiency, with complex injectables in the US key for growth.
India’s Retail Loan Defaults Rise, Impacting Lenders and Consumer Demand
India is seeing an increase in defaults on retail loans, mainly due to aggressive lending practices. This is having a negative impact on stocks, especially for lenders like Kotak and IndusInd, which have reported problems with unsecured loans. Smaller lenders are facing even bigger declines, and analysts warn that the situation could worsen if consumer demand doesn’t pick up.
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