Stocks To Buy : The Indian stock market closed with little change on Tuesday, 27 August, as the benchmark indices, Sensex and Nifty 50, wrapped up the session in flat territory. The day’s trading saw the Sensex gaining a mere 14 points to end at 81,711.76, while the Nifty 50 added just seven points to close at 25,017.75. The market was weighed down by losses in some heavyweight stocks, including Reliance Industries, ITC, Hindustan Unilever, HDFC Bank, and Titan, which acted as drags on the indices.
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Market Performance Overview
The Nifty 50’s performance was notable as it approached a record high, coming within just five points of achieving this milestone. Despite this, the index’s growth of about 3.6% over the last nine sessions—its longest winning streak in 16 months—indicates underlying strength in the market. However, Tuesday’s session reflected a lackluster performance overall, highlighting the market’s current mixed sentiment.
While the benchmark indices remained flat, the mid-cap and small-cap segments recorded more robust gains. The BSE Midcap and Smallcap indices both rose by half a percent, showing investor interest in these sectors. This divergence between large-cap and mid- to small-cap stocks suggests that investors are finding more value and growth potential in smaller companies, even as the broader market faces headwinds.
Factors Influencing the Market
Several factors are influencing the current market scenario. On the positive side, expectations of interest rate cuts by the US Federal Reserve in September continue to be a supportive factor for global markets, including India. The prospect of lower interest rates generally boosts investor sentiment as it reduces borrowing costs for companies and consumers, potentially leading to higher economic growth.
However, the Indian market is also grappling with challenges that are tempering the bullish sentiment. Analysts point out that stretched valuations are a significant concern. As stock prices have risen, the price-to-earnings ratios for many companies have reached high levels, which could make them less attractive to value-conscious investors. Additionally, geopolitical tensions—whether related to global trade disputes, regional conflicts, or domestic issues—are weighing on market sentiment, adding an element of uncertainty.
Despite these challenges, the Indian market has shown resilience, supported by a liquidity surplus. Analysts suggest that the abundant liquidity in the financial system has helped absorb selling pressure, allowing the market to maintain its upward momentum even in the face of potential headwinds.
SMC Global Securities’ Top Stocks to Buy
In this mixed market environment, domestic brokerage firm SMC Global Securities has identified four stocks that they believe are well-positioned to deliver strong returns over the next year. These stocks have been selected based on a combination of technical analysis and fundamental strength, and they offer a glimpse into sectors and companies that are likely to perform well despite broader market uncertainties.
1. Adani Wilmar Ltd.
- Current Market Price (CMP): ₹374.05
- Target Price: ₹422
- Upside Potential: 12%
Adani Wilmar Ltd., a joint venture between the Adani Group and Wilmar International, is one of India’s leading FMCG companies, primarily known for its edible oil brand, Fortune. The company has been experiencing strong growth trends, driven by robust urban demand and a gradual revival of rural consumption. A notable shift towards packaged foods across urban, semi-urban, and rural markets is expected to provide significant tailwinds for the company in the coming years.
Adani Wilmar has ambitious plans to double its volume in packaged foods over the next three years, while also continuing to grow its packaged oils segment at a double-digit pace. The company has been expanding its processing capacities and increasing the distribution of its products across India. It also tailors its strategies to regional markets, offering region-specific product varieties and deepening its market penetration through targeted pricing strategies.
The brokerage expects Adani Wilmar’s stock to reach a price target of ₹422 within 8 to 10 months, based on a current price-to-book value (P/BV) of 5.90x and an estimated FY25 book value per share (BVPS) of ₹71.49.
2. PNC Infratech Ltd.
- Current Market Price (CMP): ₹458.35
- Target Price: ₹542
- Upside Potential: 16%
PNC Infratech Ltd. is a leading infrastructure construction, development, and management company in India, with a focus on road and highway projects. As of June 2024, the company had already invested ₹2,079 crore, with an additional ₹1,013 crore to be invested over the next two to three years. This investment will be funded through internal accruals, underscoring the company’s strong financial position.
PNC Infratech has a robust order book and a healthy pipeline of new orders, indicating sustained growth visibility for the company. Recently, it signed a Share Purchase Agreement (SPA) for the monetization of 12 road assets, with a total enterprise value of ₹9,005.7 crore and an equity value of ₹2,902 crore. This monetization is expected to strengthen the company’s balance sheet, providing it with the financial flexibility to pursue future growth opportunities.
The brokerage anticipates that PNC Infratech’s stock will reach a target price of ₹542 in the next 8 to 10 months, supported by a one-year P/BV multiple of 2.45x and an FY25 BVPS of ₹221.08.
3. Devyani International Ltd.
- Current Market Price (CMP): ₹180-185
- Target Price: ₹225-230
- Upside Potential: 24%
Devyani International Ltd. is a key player in the Indian quick-service restaurant (QSR) industry, operating well-known brands like KFC, Pizza Hut, and Costa Coffee. The stock has been on a gradual recovery path since hitting its 52-week low of ₹142.25 in March 2024. It has reclaimed its position above the 200-day Exponential Moving Average (DEMA) on daily charts, indicating a bullish trend.
Over the past three months, the stock has been consolidating within a range of ₹160-185. However, last week, it broke out of this consolidation phase with rising volumes, signaling the potential for further gains. The stock is expected to target levels of ₹225-230 in the near term, with a recommended stop-loss (SL) below ₹160 levels to manage risk.
4. Radico Khaitan Ltd.
- Current Market Price (CMP): ₹1,820-1,840
- Target Price: ₹2,135-2,150
- Upside Potential: 18%
Radico Khaitan Ltd. is one of India’s oldest and largest manufacturers of Indian Made Foreign Liquor (IMFL). The stock has been consolidating in a broader range of ₹1,650-1,800 on short-term charts, but the overall trend remains bullish. The stock recently broke out above a Symmetrical Triangle pattern on the charts, supported by a significant increase in trading volumes. This breakout suggests that the stock has the potential for further gains.
The brokerage recommends buying Radico Khaitan’s stock in the range of ₹1,820-1,840, with an upside target of ₹2,135-2,150 levels. A stop-loss should be placed below ₹1,650 levels to protect against downside risks.
Conclusion
In summary, the Indian stock market is currently navigating a complex landscape of positive drivers and challenging headwinds. While the broader indices like Sensex and Nifty 50 remained flat, the mid-cap and small-cap segments showed promise, indicating that investors are still finding opportunities in certain pockets of the market. SMC Global Securities’ top stock picks for this week—Adani Wilmar, PNC Infratech, Devyani International, and Radico Khaitan—are examples of companies with strong fundamentals and technical indicators that suggest they could deliver solid returns over the next year. As always, investors should conduct their own research and consider their risk tolerance before making any investment decisions.