25 stocks to buy this Diwali: Here are brokerages' top picks for Samvat 2078

India emerged as one of the best-performing equity markets this calendar year with a rise of around 30 per cent year-to-date. With its record high levels, the domestic equity market has climbed the wall of worry, be it the second COVID-19 wave in the country in April-May 2021 or the third wave expectations during August-September 2021. The 30-share index has advanced 13,598 points to 61,350 on October 26, 2021 from 47,751 on December 31 last year. Likewise, the NSE Nifty index has gained 30 per cent to 18,268 from 13,981 during the same period.

Market watchers believe that TINA (there is no alternative) factor is also at play amid the low interest rate environment. Besides, the reach of equities has increased due to rapid digitalisation. This is also visible with the record number of demat accounts being opened over the last 18 months, indicating enhanced retail participation. The higher pace of vaccination, pro-growth policy action, National Asset monetisation pipeline that will drive capex cycle, strong recovery in real estate market that has a multiplier impact on the economy and buoyancy in corporate earnings growth further supported the Indian equity market.

Considering the present market conditions, ICICI Securities said, "We continue to advise investors to utilise equities as a key asset class for long term wealth generation by investing into quality companies with strong earnings growth and visibility, stable cash flows, return on equity (ROE) and return on capital employed (ROCE). To make your portfolio future ready, here is a list of 25 stocks that five brokerages have picked as their Diwali bets. Have a look:

Recommendations by Nirmal Bang Securities

Ashok Leyland | Current Market Price (CMP): Rs 143.40 | Target price: Rs 159

Rationale: Ashok Leyland to be a key beneficiary of the commercial vehicle cycle recovery and view strong Government initiatives on infrastructure to be positive for the company over the medium term as well. The company lies as a pure-play on the impending calendar year cycle recovery.

Container Corporation of India (CONCOR) | CMP: Rs 676.15 | Target price: Rs 1,108

Rationale: The company is likely to benefit from the operationalisation of the western dedicated freight corridor (DFC), new rail plan focused on the improvement of rail freight market share from 26 per cent currently to 45 per cent. One of the key focus areas is to increase the containerisation of freight. CONCOR has a market share of 60-70 per cent of the total container traffic on rail network.

Dr Reddy's Laboratories | CMP: Rs 4,667.70 | Target price: Rs 5,515

Rationale: China can be an important growth engine for Dr Reddy's Labs (DRL) in emerging markets. The pharma major is the only Indian company to have secured approvals under QCE framework for China markets. Nirmal Bang Securities expects two more approvals for DRL in the near term in China which would include--gRevlimid and Pramipexole.

Inox Leisure | CMP: Rs 419.70 | Target price: Rs 530

Rationale: The company is the beneficiary of the 'oligopoly in its infancy' phenomenon that the industry will continue to be on once the pandemic phase is through. It will see low teen revenue growth for the next 10-20 years on the back of high single-digit volume growth and inflation is driven pricing growth. Revenue mix shift will deliver margin expansion and EBITDA growth could be in the near mid-teens.

Jamna Auto | CMP: Rs 97.20 | Target price: Rs 120

Rationale: Nirmal Bang Securities sees a strong multi-year commercial vehicle upcycle over the next 2-3 years, driven by a significantly low base (MHCV sales have fallen to FY04 levels), government's thrust on infrastructure development and a strong pick-up in replacement demand on implementation of the scrappage policy.

The commercial vehicle industry will see recovery from the second half of FY22 post going through a tough phase over the last two years due to change in axles load norms, sluggish economic environment and COVID-19. Jamna Auto is well placed to reap the benefits of strong commercial vehicle demand going forward due to its dominant position in the original equipment makers (OEM) market.

Recommendations by: Anand Rathi Share and Stock Brokers

Infosys | CMP: Rs 1,704.10 | Target price: Rs 2,000

Rationale: The company benefits from its strong presence across varied industries and markets. It has stepped up its hiring program. With a strong start to the financial year, good deal momentum in Q2, a robust pipeline, the company is increasing its annual revenue guidance from 14-16 per cent previously to 16.5 to 17.5 per cent in constant currency. Operating margin guidance remains the same, 22 to 24 per cent.

Hindalco| CMP: Rs 482.10 | Target price: Rs 578

Rationale: The company remains on its guided strategy with deleveraging underway and overall operations getting stronger by each passing period. The valuations are still not stretched considering the solid operational performance and ongoing balance sheet deleveraging together with strong opportunities for pursuing growth capex at a comfortable leverage position.

Indo Count Industries | CMP: Rs 272.10 | Target price: Rs 334

Rationale: An uptick in the demand for home textile is seen owing to various factors like China+1 strategy, US ban of Xinjiang cotton, strong demand in value-added categories such as health and hygiene. Appropriate product mix, government incentives (RoSCTL, RoDTEP) will aid in strengthening margins.

Rossari Biotech | CMP: Rs 1,436.10 | Target price: Rs 1,840

Rationale: The company's newly commissioned Dahej unit ramp-up is also going as planned. The company is initially targeting asset turnover of about 4-5 times this fiscal year while post stabilisation it could reach 5-6 times. In terms of strategy, management continues to focus on leveraging its R&D capability and introducing new business lines within core chemistries.

Vardhman Special Steels | CMP: Rs 269.30 | Target price: Rs 350

Rationale: Expansion of capacity from 2,00,000 MT per annum to 2,80,000 MT per annum of rolled products and increase in utilisation levels and strategic partnership with Aichi Steel Corp (Toyota Group subsidiary) augurs well in long term for the company.

Recommendations by: IDBI Capital Markets

Max Healthcare Institute (MHI) | CMP: Rs 343.70 | Target price: Rs 475

Rationale: MHI's network consists of 10 owned/ leased hospitals, four partnered healthcare facilities and two Radiant hospitals operated on an O&M basis. It has a dominant presence in the northern region, which accounts for around 92 per cent of its revenues. The stock is also trading at a P/E ratio of 33x FY23 Bloomberg EPS estimates which look attractive.

Valiant Organics | CMP: Rs 1,429.10 | Target price: Rs 2,170

Rationale: The company is focused on maintaining 24-25 per cent EBITDA margins on a long term basis. The backward integration efforts and commercialisation of new products will support maintaining sustainable margins in the long term.

CCL Products | CMP: Rs 359.40 | Target price: Rs 510

Rationale: Over the past two decades, CCL has developed a sound business model which is not easy to replicate. Moreover, the company has managed to improve its gross margin in the past few quarters driven by a better product mix and should likely be sustained over FY22-FY23E. There is strong sales growth visibility over the coming three years given a strong order backlog.

Surya Roshni | CMP: Rs 664.05 | Target price: Rs 950

Rationale: In 2014, Surya started manufacturing fans to benefit from its extensive distribution network. Post that, the company gradually launched other home appliances including electrical storage water heaters, room heaters, dry irons, steam irons and immersion heaters, mixer grinders, induction cookers, toasters, etc. The company is a very small player in this segment. Hence, growth is likely to be high in the coming five years due to a low base and Surya's strong distribution network. IDBI Capital Markets believes that the company's EPS to grow at CAGR of 48 per cent over FY21-23E and ROE to improve to 20 per cent  in FY23 (average 10 per cent over FY16-FY21).

Route Mobile | CMP: Rs 1,970.15 | Target price: Rs 2,460

Rationale: Rising adoption of smartphones, high internet speed and COVID-19 has led to digitisation of the business model. Many companies are adopting digital tools such as live chat, IVR, email, video, voice, SMS and chatbots. The company is likely to lead to 30 per cent CAGR growth in communications platform as a service (CPass) over FY21-26. Route being one of the leading providers will be a key beneficiary of this tailwind.

Recommendations by: Cholamandalam Securities

HDFC Bank | CMP: Rs 1653.05 | Target price: Rs 1,956

Rationale: Improving credit mix, strong CASA and stable asset quality are expected to support net interest margin (NIM) expansion. Given improving earnings prospects and demanding valuations the stock can be looked at from a medium to long term investment perspective.

Dalmia Bharat | CMP: Rs 1940.95 | Target price: Rs 2,361

Rationale: The cement demand has recovered to normalised levels after absorbing the jolts of corona pandemic. The demand remained intact in Q2FY22 on a YoY basis despite being a seasonally weak period of year. The East & Central regions are amongst the least concretised region in India and thus expected to generate maximum demand. Dalmia Bharat has a stronghold in the Eastern region and expects incremental market share in the central and northern region on account of capacity expansion.

ABB India | CMP: Rs 1,841.80 | Target price: Rs 2,125

Rationale: ABB India is capitalising on the need for competent infrastructure required for electric vehicle evolution (EV) by creating an ecosystem of charging stations (opportunity estimated to be more than $3 billion per annum). ABB is likely to build a strong base of EV charging kiosks across the nation. Some of the agreed states have dedicated policies to support EV adoption and initiated tendering the initial set of standalone EV charging stations.

Sona BLW Precision Forgings | CMP: Rs 639.75 | Target price: Rs 700

Rationale: The EV evolution is likely to bring radical changes in the auto industry and thus, the company is a great franchise to include in the portfolio. Sona BLW Precision Forgings is a leading automotive technology company in India that specialises in delivering precision-forged drive train components and motors. The company focuses on improving global electrification along with its traditional revenue drivers of differential gears, assembly and conventional and micro-hybrid starter motors.

Deepak Fertilizer | CMP: Rs 412.35 | Target price: Rs 502

Rationale: With the evolving business dynamics, Deepak Fertilizer has revamped its business strategy (transforming from commodity to specialty) to further enhance its market leadership position. The company aims to emphasise more on high value differentiated products and thus, upgraded its entire production range to a higher value chain. Resultantly, the margins are expected to improve going ahead.

Recommendations by: ICICI Securities

Action Construction | CMP: Rs 245 | Target price: Rs 300

Rationale: Strong growth is expected to be in the material handling and construction equipment business in excess of 25-30 per cent over the next three to four years, which is still a low hanging fruit for the company.

Bank of Baroda | CMP: Rs 99.90 | Target price: Rs 120

Rationale: ICICI Securities believes that credit growth will pick up with unlocking and speedy economic recovery. Transfer of NPAs to the bad bank would lower broad NPA numbers and aid recovery. Q2FY22 could see recovery from DHFL that can boost earnings while a recent outlook upgrade by Moody's on the Indian banking system would impact positively on BoB as well.

Bata India | CMP: Rs 1,988.87 | Target price: Rs 2,380

Rationale: Bata's focus on cost reduction, omni-channel, change in product mix (higher proportion of casual footwear) and calibrated expansion of retail network through asset-light franchisee route is expected to be structurally positive for the company.

Gateway Distriparks | CMP: Rs 273.90 | Target price: Rs 350

Rationale: The company has been actively reducing its gross debt position, which reached a high of Rs 740 crore in FY19 (due to buyback of Blackstone's entire stake in the rail segment for Rs 850 crore) to Rs 480 crore in FY21 (expected to significantly lower in FY23E). A strong balance sheet combined with strategically located infrastructure will help Gateway Distriparks to capitalise on future growth opportunities and improve its return ratios.

Mahindra Lifespace| CMP: Rs 275.55 | Target price: Rs 325

Rationale: ICICI Securities likes the company given its strong parentage, the management's focus on expanding its overall scale of operation and a comfortable balance sheet. The new land purchases could enable it to scale up its residential business. The change in management and execution has started to show initial signs of transformation.

(CMP as of October 26; Disclaimer: Stocks recommendations by experts or brokerages are their own and not those of the website or its management. BusinessToday advises market participants to check with certified experts before taking any buy, sell or hold decisions.)

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