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Share Market vulnerable; here are the stocks to buy in this phase of Dalal Street

The medium term earnings outlook remains robust.
(Image: REUTERS)

India has seen a severe second wave of the coronavirus pandemic as cases rose nearly 4 times from the previous peak. However, stock markets remain resilient, and after a 5% fall from all-time highs, benchmark indices are again surging higher. This, according to global investment manager HSBC, is owing to the better positioning of India Inc this time around. “Global liquidity remains supportive, and perhaps any significant market fall may be viewed as a buying opportunity,” HSBC said in a recent note. However, the second wave in HSBC’s view is more precarious than the first one and may mean downside risks to growth expectations this fiscal year.

Nifty corrected 5% from the all-time high in February, but has recouped some of the losses and is now nearing the highs again. The current phase of markets has been termed by HSBC as a short-term vulnerability phase. “We believe the market could be very volatile depending on how the COVID-19 situation evolves but any deep correction is quite unlikely, making this phase a “vulnerability phase” within the overall bull market,” they said. While growth may be hit due to the surge in cases, vaccination drive is likely to act as the key catalyst for the market. 

Stocks to buy

While valuations remain stretched at this juncture, HSBC finds opportunities in sectors that have seen a correction amid rising coronavirus cases. These primarily include covid recovery plays such as India Hotels and Prestige Estates. While India Hotels is down 18% from its recent highs, Prestige is down 14% in the last month. 

  • India Hotels target price – Rs 160
  • Prestige Estates target price – Rs 380 

Further, the report adds defensives and underperformers as possible bets at this stage. Here, HSBC has picked Hindustan Unilever, Bharti Airtel, and Axis Bank

  • Hindustan Unilever target price – Rs 3,000 
  • Axis Bank target price – Rs 800 
  • Bharti Airtel target price Rs 700

HSBC also sees beneficiaries of the new normal as possible picks. These include healthcare and wellness plays such as CIPLA and IPCA Labs, along with Marico

  • CIPLA target price – Rs 1,055 
  • IPCA Laboratories target price – Rs 2,530 
  • Marico Industries target price – Rs 510 

Lastly, the report advises investors to bet on structural winners. Under this category, HSBC picked Titan Company, Asian Paints, Bajaj Auto, ICICI Bank, and Bajaj Finance

  • Titan target price – Rs 1,800 
  • Asian Paints target price – Rs 3,150 
  • Bajaj Auto target price – Rs 4,300
  • ICICI Bank target price – Rs 670 
  • Bajaj Finance target price – Rs 6,375

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