Dixon Technologies Ltd, Maruti Suzuki India Ltd, PB Fintech Ltd, Godrej Properties Ltd and LTIMindtree Ltd are HSBC Global Research's top five picks post the recent correction. The foreign brokerage said India's premium multiple valuation will remain under pressure until earnings stabilise. It noted that December quarter results were below estimates, even amid the backdrop of lowered expectations.
"Growth is likely to remain weak for at least two quarters, before the lower base or potential policy impact kicks in. We see downside risk to consensus's 15% growth expectations in CY25. However, there are pockets of growth. The recent sell-off has created a good opportunity for companies with a strong or improving growth narrative," it said.
HSBC Global Research said the recent quarterly results affirm improving growth prospects for software companies and the sector also benefits from the weak rupee. A less restrictive monetary policy will be good for lenders struggling for capital. It like likes consumer companies that benefit from the recovery in rural demand or are tapping into the overseas market.
HSBC said the growth story for electronics manufacturer Dixon Technologies should keep unfolding, supported by industry tailwinds, a favourable policy environment and its strong execution.
It said the Street does not appear to fully appreciating the export potential (especially EVs) for Maruti Suzuki, its key driver for growth in coming years.
On PB Fintech, it said the company can grow at 2-3 times the industry on the back of strong competitive advantages built in the online insurance marketplace while also benefiting from operating leverage.
"Godrej Properties is one of the few real estate companies that has a pan-India presence, a deep balance sheet, brand strength, and a large land bank which allows it to grow despite the current challenging market. The current sell off may also provide additional opportunities," it said.
Meanwhile, demand outlook for the IT Services sector is gradually improving and LTIMindtree should benefit from rising demand, particularly from banking clients, HSBC said.
At present, India's growth is slowing, while elevated US bond yields and forex pressure is keeping foreign investors on edge.
"The consumption-oriented proposals in the recent Budget may not be enough to turn around the downbeat sentiment, but the fiscal discipline exhibited by the government gives the central bank room to turn less restrictive," HSBC said.
It noted that monetary policy, amidst falling inflation, will have to play a bigger role to revive growth. The RBI has announced measures to ease liquidity in the banking system, followed by the much anticipated rate cut last Friday.
HSBC economists expect more liquidity measures in coming weeks, but looks for just one more rate cut in April. Foreign outflows are already at levels seen in previous intervals of FII selling, but 2021-2022 period shows they have room to sell more, HSBC warned.