Kotak Securities' top 10 stock picks for January

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2020 has turned out to be one of the most unpredictable year for everyone. Equity markets worldwide have gone through a roller coaster ride in this calendar year. Two defensive sectors namely BSE Healthcare (up 62%) and BSE IT (up 56%) gave exceptional returns in 2020. Recovery across risk assets supported mainly by easy monetary policy by global Central banks. Finally, we are starting to see the light at the end of the tunnel with covid vaccines availability. Three sectors delivered negative returns in 2020 which are BSE Bankex (-2%), BSE Oil & Gas (-4%) and BSE Utilities (-1%).

Analysts at Kotak Securities believe there are three key factors which will drive the markets in 2021 – i) Covid-vaccines wide availability and reopening of economies, ii) Dollar index movement and related FPI flows, iii) Oil price movement, iv) Inflation and interest rates movement and vi) Earnings trajectory.

“We see possibility of moderate earnings upgrade over the next few months. We expect Nifty-50 earnings to increase by 11%, due to base effect in FY21E, 28% in FY22E and 19% in FY23E. Notably, sharp earnings jump in FY22E will be supported by automobiles, banks, metals and telecom sector. Our updated free float EPS for Nifty-50 stands at ₹488 for FY21E, ₹628 for FY22E and Rs746 for FY23E. Moreover, last five years earnings CAGR of Nifty-50 is just 2.6% (i.e. FY16-20). On the low base, we expect Nifty-50 earnings CAGR for the period of FY20-23E to be ~18%.

Top stock picks for January by the brokerage includes, Bajaj Auto, Bharti Airtel, Britannia Industries, Hindustan Zinc, ICICI Bank, Infosys, Kalpataru Power, Petronet LNG, State Bank of India and SBI Life Insurance.

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Source: Kotak Institutional Equities.

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