Analysts pick stocks to buy as Sensex hits 80,000; HDFC Bank, ITC top bets | News on Markets

On July 3, 2024, the BSE benchmark Sensex index hit a record high of 80,074 level in the intraday trade, surpassing the 80,000-mark for the first time ever. The momentous feat was achieved largely driven by a strong rally in HDFC Bank shares.

The BSE Sensex had hit the 70,000-mark for the first time on December 11, 2023, and has risen 13.7 per cent since then (till Tuesday’s close).

Among individual stocks, Mahindra and Mahindra (M&M), Power Grid Corporation, Adani Ports and SEZ, Bharti Airtel, Tata Motor, Tata Steel, and NTPC have been at the forefront of this rally, ACE Equity data shows. These stocks have surged in the range of 30 per cent to 72 per cent.

On the flipside, Asian Paints, Bajaj Finserv, Titan Company, ITC, IndusInd Bank, Kotak Mahindra Bank, Bajaj Finance, Hindustan Unilever (HUL), Nestle India, and HDFC Bank have been the biggest laggards, giving returns between (-)9.5 per cent and (+)4.7 per cent.

The BSE BANKEX has risen 9 per cent so far in calendar year 2024, while the BSE FMCG index is up 6 per cent. By comparison, the benchmark index has added 10 per cent year-to-date.

Large-caps the place to be

On the valuation front, the Sensex index is trading at a trailing price-to-earnings (P/E) multiple of 24.2x at present. By comparison, the index’s 5-year P/E average stands at 26x and 10-year at 24x.

Considering the 7-per cent growth rate for the Indian economy, and the index’s severe underperformance over the past few years, relative to mid- and small-caps, analysts believe the BSE Sensex index remains in a comfortable zone and has room for growth.

“Investors should allocate at least 50 per cent of their equity assets in the large-cap stocks as the index remains in a comfortable zone with another 7-10 per cent rally, over the next one year, highly likely,” said G Chokkalingam founder and head of research at Equinomics Research.

Word of caution

That said, analysts cautioned that the rally in the banking and consumption sector would hinge on the progress of the monsoon, which would determine demand recovery and the subsequent credit growth.

“If the interest rate cut cycle gets delayed due to weak monsoon, which is in deficit as of now, the sentiment may take a hit. The benchmarks, in the worst case scenario, may see a downside of 3-5 per cent,” added Chokkalingam of Equinomics Research.

By comparison, the broader mid- and small-cap indices may see a steeper fall with select individual stocks falling up to 30 per cent, he said.

First Published: Jul 03 2024 | 1:18 PM IST