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While retaining its bullish stance on the Indian equity market, domestic brokerage firm ICICI Securities believes that the benchmark NSE Nifty index can hit 17,250-mark by June 2022 on likely improvement in profit and capex cycle.
Overall, the March quarter is turning out to be the fourth consecutive quarter of earnings beat exceeding misses, which has resulted in PAT/GDP rising further to 2.8% despite an upward revision to the FY21 GDP base. At present, the ratio is moving higher from a two-decade low level of 1.6%.
The net profit of Nifty200 companies have risen sharply by 120% YoY driven by cyclical in Q4FY21. “Latest GDP print indicates real investment rate rose to a 2-year high of 34.3% driven by robust construction and manufacturing sector along with higher government spending. It is also corroborated by robust quarterly results of sectors such as metals, cement, building material, capital goods, auto as well as the resilience shown by merchandise exports,” ICICI Securities said.
It believes that the environment for capital expenditure is turning conducive at a macro level. The 50-share Nifty index traded 80 points higher at 15,891 in the morning trade on Tuesday.
Economic recovery
The investment rate continued to rise in Q4FY21 and is at a 2-year high of 34.3% in real terms and 7-year high of 31.2% in nominal terms. Construction (14.5% YoY), manufacturing (6.9% YoY) and electricity (9.1% YoY) growth were robust in Q4FY21 as evidenced by GDP print, corporate results and robust merchandise exports.
“MoM expansion of PMI manufacturing (over 50 reading) in Q1FY22 so far is a positive surprise as April-May’21 may be the worst affected period in the second Covid wave with June expected to witness the reopening of the economy from the partial lockdown. GST collections also remained relatively robust at Rs 1.1 lakh crore,” ICICI Securities said.
Stocks to buy
Considering the present market scenario, the brokerage likes 14 stocks including State Bank of India (SBI), Axis Bank, HDFC Bank, NTPC, PTC India, Larsen & Toubro, Ultratech Cement, Bharti Airtel, Tata Communications, GAIL, Tata Motors, TVS Motors, Motherson Sumi and Jyothy Laboratories.