Despite a multitude of headwinds including adverse macros, rising rates, tightening liquidity and volatile commodity costs, the Nifty has outperformed global markets 2022 YTD.
In a recent note, domestic brokerage Motilal Oswal said that analyst sentiment, which is measured by the proportion of Buy/Hold/Sell ratings, has improved over the past year with the percentage of Buy ratings increasing to 75 percent from 74 percent a year ago. Further, the percentages of Hold have remained stable but Sell ratings have declined to 9 percent from 10 percent, a year ago, it added.
Among sectors, the brokerage pointed out that sentiments on sectors including autos, cement, and healthcare have been positive with their coverage improving 8 percent, 6 percent and 5 percent YoY, respectively. However, NBFCs (due to a drop in coverage of HDFC), Insurance, and Retail have taken a hit, with their coverage slumping 16 percent, 8 percent and 6 percent YoY, respectively, informed MOSL.
Among the Nifty constituents, Maruti Suzuki and Bajaj Auto are the most widely covered stocks on the Street (54 analysts covering the stocks), while Grasim Industries and Bajaj Finserv are the least covered stocks (10 analysts covering these stocks), the report highlighted.
As per the report, ICICI Bank is covered by 51 analysts on the Street and it enjoys 98 percent Buy ratings, followed by L&T (98 percent), ITC (97 percent), SBI (96 percent) and HDFC (96 percent). Conversely, JSW Steel (24 percent), Wipro (33 percent), Shree Cement (38 percent), TCS (47 percent), and Asian Paints (48 percent) have the lowest percentage of Buy ratings, the brokerage pointed out.
It also noted that some of the most popular non-Nifty stocks with the maximum coverage are TVS Motors (covered by 48 analysts; 60 percent Buy), Ashok Leyland (47 analysts; 83 percent Buy), ACC (46 analysts; 52 percent Buy), Ambuja Cements (46 analysts; 39 percent Buy), and Havells (46 analysts; 54 percent Buy).
Based on the consensus target prices for the Nifty-50 companies, there is a potential upside of 13 percent for Nifty-50 to 19,717, stated MOSL.
Sectors including private banks, Oil & Gas, NBFCs, Technology, PSU Banks, Telecom and Consumer are likely to contribute the most to the Nifty-50’s upside, predicts MOSL.
According to it, stocks with the highest target upsides are UPL (+36 percent), ONGC (+32 percent), HDFC Life Insurance (+28 percent), Axis Bank (+25 percent), and Bharti Airtel (+25 percent).
Meanwhile, stocks with the most target downsides are JSW Steel (-18 percent), Asian Paints (-4 percent), Eicher Motors (-3 percent), Coal India (-2 percent), and Wipro (-1 percent), it noted.
The brokerage believes that the top-10 stocks will likely contribute 72 percent to the Nifty’s target upside.
Markets have bounced back smartly in July 2022 with Nifty-50 rising 9 percent MoM and almost wiping out the entire YTD’CY22 decline. Nifty is now flat for YTD’CY22 and strongly outperforming the global markets despite the sharp FII selling witnessed during Oct’21-June’22, said MOSL
Going ahead, it noted that commodity costs have corrected over the last few weeks, offering some respite to the adverse macros. Further, global bond yields have moderated from their recent highs and earnings estimates for the Nifty stocks have not seen any worthwhile cuts.
"As the benefit of the recent moderation in commodity costs start accruing in H2FY23E, we expect other sectors to contribute too," added the report.