SBI, ITC, Infosys to be best stock bets in 2012

Only three large cap stocks - State Bank of India (SBI), ITC and Infosys - have found multiple bets by the brokerages out of seven brokerages that have responded to the query on stock bets for 2012.

Three of the seven brokerages - InvestShoppe India, Motilal Oswal Securities (MOSt) and CNI Research - have bet on SBI to be the best performer in the next 12 months. This is followed by ITC (Kotak Securities and Ashika Stock Broking) and Infosys (Geojit BNP Paribas and MOSt), on which two brokerages each have bet.

"SBI enjoys a competitive edge over its peers with strong deposit franchise, backed by over 18,500 branches at the group level, leading to robust growth in CASA (current account and savings account deposits) and fee income," said Rikesh Parikh of MOSt.

And Parikh expects its earnings to grow at a compounded annual growth rate (CAGR) of five per cent in the two years to 2012-13. Besides, he sees it posting huge rise in return on assets (RoA). Kishor Ostwal of CNI Research terms the rating downgrade on SBI citing rising non-performing assets (NPAs) as an over-reaction.

"By any stretch of imagination the NPAs of SBI is still negligible compared to its global peers especially in China, US and Europe and on comparative basis this stock looks underpriced."

SBI was hammered as the RBI raised rates 13 times over the last 20 months. As the cycle reverses in the next few months, it would benefit, Ostwal added. On the reasons for picking Infosys Technologies as a best bet, Alex Mathews, headresearch of Geojit BNP Paribas, said, "The rupee depreciation against dollar (by over 16 per cent in five months) will benefit the software exporter."

Besides being the value player in software sector and expanding to new markets, Infosys is better placed to drive productivity post the restructuring undertaken earlier this year. "We expect earnings to grow by 15 per cent in 2012-13. Buy with a target price of Rs 3,300," said Parikh of MOSt.

Dipen Shah, head-fundamental research of Kotak Securities said that ITC's products show encouraging trends in market share, improving profit growth visibility. Besides, Shah cited ITC as having a long track record of high market share in the cigarette business.

Other large cap stocks being recommended include TCS, HDFC Bank, Maruti Suzuki, ICICI Bank, L&T, Tata Steel, Tata Motors, Hindalco, Sun Pharma, JP Associates, Bharti, Cipla, M&M and Ranbaxy.