Majority of the big boys on D-Street gave returns which were higher than benchmark index return for the year 2017 which will keep the interest alive of investors with respect to large caps going forward.
It has been a stellar year for the bulls as benchmark indices surpassed crucial resistance levels to hit fresh record highs in the year 2017. The S&P BSE Sensex came within a kissing distance of Mount 34K while the Nifty50 surpassed 10,500 levels.
Consumer durables, metals, auto, finance, oil & gas were the key sectors which did well in the year 2017. The bluechips of the bluechips also did not disappoint investors. They might not have given multibagger returns but stocks with a market cap of over USD 10 billion in the year 2016 and 2017 have given double-digit returns of up to 84 percent.
For reference, we have taken rupee value at 67/USD towards the close of 2016 and Rs 64/USD for the year 2017 for calculating market capitalisation.
Out of 29 stocks, 11 stocks rose in the range of 30-84 percent which includes names like M&M, UltraTech Cements, ICICI Bank, L&T, HDFC Bank, Kotak Mahindra Bank, Bharti Airtel, Maruti Suzuki Ltd etc. among others.
But, as many as 5 out of 29 stocks which belong to the USD 10 billion club gave a negative return which includes names like Sun Pharma, Tata Motors, Coal India, ONGC, as well as Infosys.
Indian equity markets witnessed a historic day on Friday when the total market valuation of all listed companies on BSE touched a record high of over Rs 150 lakh crore helped by strong gains in the broader market.
The 30-share index Sensex ended with a gain of 184.02 points, or 0.55 percent, at 33,940.30 on Friday. The market capitalisation of BSE-listed companies surged to Rs 1,50,67,285 crore (USD 2.35 trillion) from Rs 1,49,98,415.29 crore on Thursday, a gain of Rs 68,869.71 crore.
The total market valuation of all listed firms on BSE had hit Rs 100 lakh crore level on November 28, 2014.
Majority of the big boys on D-Street gave returns which were higher than benchmark index return for the year 2017 which will keep the interest alive of investors with respect to largecaps going forward.
With valuations touching sky high especially with respect to midcaps most analysts advise investors to trust largecaps in the year 2018 – because there is a huge margin of safety as compared to mid or smallcaps.
“We recommend largecaps because there is a huge margin of safety in largecaps. We know that earnings have been muted for years on end now that you have a lot of margin of safety in largecaps,” S Naren, ED & CIO of ICICI Prudential AMC said in an interview with CNBC-TV18.
“But, if you ask me, do midcaps look cheap, the answer is no, they look very costly relative to largecaps. But, just like this bull run can go further, you have a situation where largecaps have a margin of safety but lower returns. So it is much wiser for a mutual fund to push largecaps than to push mid and smallcaps now,” he said.
Here’s what other global brokerages are recommending:
Maruti Suzuki: Target Rs10,563
Earlier in the month, Morgan Stanley maintained its overweight stance on Maruti Suzuki but raised its 12-month target price to Rs10,563 from Rs9102 earlier. The bull case of the stock is above Rs14000 levels.
Bharti Airtel: Target Rs600
The domestic brokerage firm, Sharekhan upgraded the stock in the month of December to buy from hold earlier with a target price of Rs600. Sharekhan expects a favourable competitive environment and lesser predatory pricing action (Jio expected to turn cash positive before the IPO to get better price discovery).
Reliance Industries: Target Rs970
Sharekhan maintains a buy rating on RIL with a target price of Rs970. The domestic brokerage firm expects EBITDA/PAT CAGR of 24%/15% over FY2017-FY2019E, driven by the commissioning of core downstream projects in FY2018.
Disclosure: Reliance Industries, which owns Reliance Jio, also owns Network18, which publishes Moneycontrol.com.
HUL: Target Rs1402
Macquarie maintains an outperform rating on HUL with a target price of Rs1402. The global investment bank is building in 250bps of margin expansion in the next three years (FY17-20E),
Which could drive an earnings CAGR of 18 percent in FY17-20E. HUL is also Macquarie’s top pick in the India Consumer sector and a Macquarie Marquee recommended the stock.
HDFC Bank: Target Rs2100
Sharekhan maintains a buy rating on HDFC Bank with a target price of Rs2100. HDFC Bank is well poised to tap the growth opportunities due to strong capital ratios, healthy asset quality and a steady revival in consumer spending
Kotak Mahindra Bank: Target Rs1200
IIFL maintains a buy recommendation on Kotak Mahindra Bank with a target price of Rs1200. IIFL expects the group to deliver 25 percent CAGR in earnings over FY17-2020.
HDFC Ltd: Target Rs1900
Sharekhan maintains a buy recommendation on HDFC Ltd with a target price of Rs1900. The premium valuation of HDFC is justified not only because of its conservative policies and market leadership but also due to high earnings visibility and best-in-class operating metrics.
L&T Ltd: Target Rs1440
Motilal Oswal maintains a buy recommendation with a target price of Rs1440. L&T enjoys several levers across its business/geographical segments. It has emerged as the E&C partner of choice in India, which provides a robust foundation to capitalize on the next leg of the investment cycle.
ICICI Bank Ltd: Target Rs365
Prabhudas Lilladher maintains a buy recommendation on ICICI Bank with a target price of Rs 365. Management expects the overall loan growth to improve led by domestic especially retail & better corporates.
UltraTech Cement: Target Rs4500
Prabhudas Lilladher maintains a buy rating on UltraTech Cements with a target price of Rs4500.
M&M Ltd: Target Rs815
ICICIdirect maintains a buy recommendations on M&M with a target price of Rs 815. M&M is one of the cheapest large cap companies available in the auto universe. An improved performance of the auto segment along with the sustained performance of the tractor segment will aid the company to narrow the valuation gap.
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