Axis Securities picks top stocks for February, says Nifty may hit 20,200 by Dec

Brokerage house Axis Securities has given a year-end (Dec 2022) target of 20,200 for Nifty50.

As per the brokerage, earnings momentum would be the critical factor for the market performance moving forward. While it has been strong in the past few quarters and largely in line with expectations for the current quarter, the future outlook of the earnings trajectory remains more critical at this juncture, it added.

The brokerage further noted that higher-than-expected market borrowing by the government is also likely to put more short-term pressure on bond yields, which in turn, will keep the equity market’s valuation in check for some time.

However, it stated that the long-term story for the equity market remains intact, as the positive structure emerging with an increase in Capex spending, which will enable banks to improve credit growth and the overall increase in the budget expenditure in FY23 will help deliver broad-based growth moving forward.

This, in turn, would improve the earnings, trajectory of Indian corporates, it explained. "We maintain our Dec’22 NIFTY50 target of 20200, valuing it at 22x FY24E earnings," the brokerage house forecasted.

Last month, January 2022 was a volatile month for the Indian markets with the Sensex down 0.4 percent and Nifty flat. The volatility was on the back of weakness in global peers due to rising inflation concerns, Ukraine geopolitical tensions, faster tapering, and the new COVID variant. Moreover, the strengthening of the dollar further dampened investor sentiment.

While the growth-oriented budget was able to provide some relief from the volatility, the upcoming RBI monetary policy and caution over hike in interest rates have kept the Indian markets in the negative territory so far. Just in the last 2 sessions, BSE has lost a market cap of over ₹5.8 lakh crore.

Going ahead, the brokerage believes that value and quality themes are likely to perform better and advises investors that sector rotation is the key.

"With overall market construct positive, style and sector rotation have been the key factors to achieve satisfactory returns. Value and momentum stood as our top-performing styles in the last one month while the Growth theme continued to lag," it mentioned in the report.

Explaining this further, the brokerage said that value continues to be a robust theme over a slightly longer time horizon. As the economy improves, Value stocks will witness significant improvement in the financial matrix. Moreover, broader economic growth means strong earnings growth.

Also, now that the market has significantly corrected since its all-time high hit on October 18, 2021, the brokerage believes that 'Value' is emerging in the Small and Mid Cap stocks, providing attractive investment opportunities in the broader market at current levels.

Furthermore, it is worth noting that, the Quality theme (large-caps) may outperform the broader market from the current levels considering a notable market correction and significantly increased volatility in the last three months, added Axis Securities.

With these themes in mind, the brokerage has made some changes in its top picks for the month of February. It has replaced Dalmia Bharat and HCL Tech with Hindalco and CCL products in the basket.

Its top picks for February are: ICICI Bank, Bajaj Auto, Tech Mahindra, Maruti Suzuki, State Bank of India, Hindalco Industries, Bharti Airtel, Federal Bank, Varun Beverages, Ashok Leyland, Bata India, Krishna Institute of Medical Sciences, Equitas Small Finance Bank, Mold-Tek Packaging, Amber Enterprises, CCL Products.