Equities to be best performing asset class for the next 1-2 years; Axis Securities suggests these 16 stocks

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While retaining its bullish view on the equity market, brokerage Axis Securities upped the Nifty’s December target to 17,700 (from 17,400 earlier) on the back of likely earnings upgrades. It believes that the equity market is likely to be the best performing asset class for the next 1-2 years and exposure to equities should not be reduced. One should focus on a quality theme and bring down portfolio risk through specific sectors.

The brokerage firm said that the earnings momentum has sustained in Q1FY22. Now it is critical for it to sustain even in Q2FY22 which seems likely considering gradual economic reopening as well as significantly picked up vaccination rate. Axis Securities also believes that the quality theme is clearly back in focus after a tremendous rally since the lows of March 2020.

In its report Multi Asset Strategy, Axis Securities highlighted that even in the mid and small cap space, quality stocks have outperformed the non-quality stocks by a significant margin in the recent past. Moreover, this divergence is significant in the small caps vis-à-vis large caps, indicating the allocation shifting increasingly towards the quality stocks across the board.

However, Axis Securities maintained its overweight stance in equity. “We believe it is time to review the entire portfolio as it provides an opportunity to recalibrate it with the initial target allocation, which will be helpful in bringing down the overall portfolio risk,” it said while adding that asset allocation and sector rotation will be keys to generate outperformance in 2021.

From an investment perspective, the brokerage house is positive on the private sector lender ICICI Bank and public sector lender State Bank of India. It is bullish on Federal Bank, Equitas Small Finance Bank, Varun Beverages, Camlin Fine Sciences, Mold-Tek Packaging, Amber Enterprises India, Minda Corporation, Steel Strips Wheels, Krishna Institute, Tech Mahindra, Bharti Airtel, HCL Technologies, Orient Cement and Ashok Leyland.