Nifty stocks to buy in 2023: Infosys, Reliance Industries, ICICI Bank, HDFC Life & SBI & more

With a 2.5 per cent rise, Nifty is ending the year 2022 on a tepid note. A total of 28 index constituents delivered positive returns in the challenging year, including Adani Enterprises, ITC, Coal India, Mahindra & Mahindra, Axis Bank and IndusInd Bank leading the pack. A couple of brokerages have picked their top Nifty stocks for 2023; they included 2022 performers such as Axis Bank, SBI and ICICI Bank. Infosys and HDFC Life remained a few non-performing stocks, which are seen recovering in 2023.

A few analysts preferred defensives from FMCG and IT sectors due to the slowing global economy; others are still betting big on the India growth story.

Vikram Kasat, Prabhudas Lilladher | ICICI Bank, Cipla

ICICI Bank

Kasat said he likes ICICI Bank because of its sustained client focus, digital capabilities coupled with a micro-market-based approach, which has resulted in strong retail growth of 25 per cent and SMB growth of 36 per cent YoY in September. Retail average SA balances have grown 50 per cent over March 2019 to September 2022. Tech spends would remain elevated which contribute 9 per cent to opex (6 per cent in FY20), he said.

Cipla

Kasat said he continues to remain positive on Cipla's growth across key geographies including India and US, given strong traction in respiratory and other portfolio. He expects ex-Covid, domestic formulation to potentially grow 10 per cent-plus going forward. He sees sustainability of current US revenues, backed by potential key launches. In near term, the timely launch of gAdvair launch (H2FY23) will be key trigger, he said.

Narendra Solanki, Anand Rathi Shares & Stock Brokers | Infosys, HDFC Bank

HDFC Bank

Solanki said HDFC Bank’s earnings trajectory remains on track, with continued growth in retail segment. A gradual improvement could be seen in NPAs, with lower slippage, he said. The ongoing expansion of branch network and cards business, coupled with the merger, is expected to aid long-term growth, he said.

The analyst has retained his ‘BUY’ call on the stock, with a target price of Rs 1,908.

Infosys

Solanki said fast changing macroeconomic conditions, corporate willingness to spend on digital transformation will continue in the IT sector. Extremely volatile capital markets and rising interest rates have started to dry up liquidity for start-up companies globally, he said adding that rising firing of employees and hiring freeze is also likely to slow down the unprecedented demand for tech talent in the coming quarters.

"This could lead to a material fall in attrition and a margin tailwind for the sector. We have a positive outlook on Infosys as a preferred pick in IT spaces as growth remains broad-based and deal momentum robust, with digital transformation rapidly scaling across verticals and regions, strong cash generation and healthy payout. We have BUY retaining with target Rs 1,800," he said.

Vinod Nair, Geojit BNP Paribas | Hindustan Unilever, HDFC Life

HUL

Demand for HUL is improving, aided by the festive season, normal monsoon, and an uptick in rural markets compared to volume de-growth in the previous few quarters. Softening raw materials and a hike in prices are expected to improve margins in the upcoming quarters, Nair said.

"Increased brand investments, well-trusted products, strategic investments in new product segments, and distribution expansion augur well for the company. Currently, the stock is trading at 1 year forward P/E of 55 times at 5-year average, providing leeway on a medium-term basis," Nair said.

HDFC Life

Growth prospects of the life insurance industry appears encouraging on the back of under penetration in India, owing to strong premium growth and support from the industry regulator. Strong new business premium growth along with cost reduction measures should aid the company’s performance in the coming quarters. Improving mix of non-par protection product (which does not provide dividend pay-outs) and a well-balanced product portfolio will provide margin expansion.

Due to a recent correction, the stock is now available at an attractive valuation.

Marc Despallieres, Vantage | HDFC Bank, L&T

HDFC Bank

The banking juggernaut shows no signs of slowing down. HDFC Bank’s aggressive approach, coupled with ultra-conservative credit norms, puts it in the best position to take advantage of the growth in the Indian economy. We think this stock is one of the best bets for cautious investors. It offers plenty of upside with relatively low risk.

Larsen & Toubro

Engineering and construction conglomerate, L&T, is another excellent stock. The upswing in infrastructure expenditure in the country will boost the share price in the medium term. Additionally, construction activity is increasing in the Middle East. L&T has a solid reputation in the region, and the coming period will see it reap the benefits of the name it has built for itself over decades.

Santosh Meena, Swastika Investmart | SBI, L&T

Swastika Investmart said it continues to think that investors should concentrate on industries that contribute to the domestic economy, with LT and SBI being the top bets for a rebound in capex.

A healthy order book announced by L&T indicates solid revenue visibility in the upcoming years.

This bull run has been led by the banking industry, particularly corporate-facing banks, and that the trend will continue because SBI still enjoys a comfortable valuation despite a big run-up in 2022, he said.

Nirav Karkera, Head of Research, Fisdom | SBI, Reliance Industries

Karkera expects banking as a sector to lead broader equities to higher levels in 2023. With fundamentals of improving loan book health, revival of public and private capex, uptick in demand for credit, efficiency and scale through rapid digitisation along with headroom for improved earnings present strong opportunities for banking stocks, he said.

"While large privately owned counterparts are also positioned strongly against this backdrop, State Bank of India can be expected to win on multiple fronts and the stock reflecting a greater positive delta. The bank is expected to register healthy growth in its loan book primarily led by retail loans and promising prospects from the corporate. The bank is positioned well through intent and capability to extend credit to capex intensive businesses like Oil E&P, Renewable energy infrastructure and NBFCs. We expect advances growth for FY23 to be in the range of 14 per cent. Considering economic participants’ growing appetite for capital, SBI’s excess SLR upwards of 2 lakh crores, and an advance book oriented towards floating rates, the bank seems well capitalised to extend credit at cost-efficient and margin-accretive rates," he said.

Karkera said the bank’s lower provisions, promising focus on gaining a stronger handle on currently elevated operating expenses and accrual of non-interest income through effective treasury operations and other fee income to be accretive to overall earnings.

"We expect key subsidiaries to also contribute significantly in the year ahead with outlook for almost all segments holding strong promise. Current state of relative valuations looks comfortable in light of outlook on the same," he said.

Reliance Industries

Karkera is bullish on Reliance Industries. He said RIL can be expected to offer investors a rewarding ride through 2023.

The major oil segment of the business has been struggling in the face of externalities such as imposition of special additional export duty on transportation fuels and tepid downstream demand. Internal changes like the planned shutdown of the SEZ refinery translated into an effective decline in output volumes. A fall in polymer pricing and lower demand from domestic and Chinese markets exerted pressure on margins in the segment. However, higher realisations continue to aid earnings.

The same can be expected to further accentuate as projects in pipeline approach completion and begin contributing to revenues, Karkera said.

"The conglomerate’s retail segment is expected to turn around and witness a structural growth period as it continues expanding physical store and digital access points while footfalls and propensity to consume recovers. The segment continues to rollup sub-segment specialists and leaders through an aggressive M&A spree. Positive operating leverage and operational efficiencies are accretive to the segment. The digital wing of the company continues to grow steadily as the telecom business adds subscribers steadily, ARPUs improve consistently and as active user base consuming through the digital ecosystem expands," he said.

While the E&P segment’s contribution to Ebitda can be expected to be limited, Karkera said, the retail and digital ventures can be expected to contribute significantly to earning expansion.

"At the same time, increased probability of the retail and digital business spin-off continues to offer a probable tailwind of value unlocking for investors," he said.

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