Correction an opportunity to invest in large cap stocks:
Recent correction in the benchmark indices from their life time peak have created an opportunity to buy quality large caps. According to analysts, the recent correction was expected and is because of profit booking made by many domestic and foreign institutional investors. Omicron fear factor has also made a reason for recent correction. At present, the current valuation of the stocks from large caps are in line with their forward PE multiples. Having witnessed a sharp 8-10 per cent correction in benchmark indices from their respective record highs, analysts are of the view that it is time to pick quality stocks at lower valuations. They are betting more on large stocks which are witnessing decent growth in their businesses in terms of volume as well as profitability.
Both global as well as domestic factors have led to a broad correction across sectors. But the fundamentals of Indian economy remain strong and most of the large cap stock companies are attractively valued post the correction, say experts.
However, there could be disappointment over earnings growth due to tight supply chain for some of the big manufacturing companies, Omicron effects and other global economic worries like inflation have forced the markets to enter into a correction phase. Once the market gets clarity over the supply side and effects of Omicron , FPIs will come back to take their positions in the market.
Investors need to follow a bottom-up approach at this point. By having a bottoms up approach, it would be better to invest in private banks like HDFC , ICICI and also some of the OEMs in automotive industry like TATA Motors , Mahindra etc . PSU’s like Power Grid , NTPC etc . Government lender State Bank of India is at very good spot as it is showing profits from last 2-3 quarters and its provisions are less. These all are good large cap stocks which one should start taking exposure and as the market recovers, the first ones to recover will be the large cap universe. So investors look for these large caps right now than midcaps.
Members of, NSE & BSE, also shares the same view and says that we are into a long term bull market and the bull market is still there. But there could be better entry points there going ahead.
One needs to stick to large caps and in that also with the same old tried-and-tested names that have been the stars of the bull run.
Investors should be aware that the ongoing correction is temporary and the Indian domestic markets are poised to grow with the improvement in the economy and further policy initiatives like “Atmanirbhar Bhart” would further boost the domestic company’s business and strengthen their balance sheets.
It is a good opportunity to buy large cap stocks as against mid cap stocks. Moreover, as said earlier, large cap stocks have significant FPI holding; once the cloud of high inflation and uncertainty over impact of Omicron is over, the large flock of FPI would again sit in the domestic stock markets.
Some of the large caps are trading below their intrinsic value and investors should look to buy those. There are several large cap stocks which are now available at good valuation than before, thanks to the recent correction in the last two months and Current valuations are very good entry points for investors in the large cap space.
Further, investors should evaluate each stock as per their own analysis and start betting on all which are available at good valuation. The correction phase that was expected in large caps is already about to complete and now it is the right time to put in bets on large caps.
We have collated a list of some large cap stocks which investors can look at buying for an investment horizon of 6-12 months:
M&M Ltd: View: Buy| Target: Rs 1500
The management expects sales to bounce back in FY22 as the company has strategically lined up various launches, as many factors including fuel and interest rates have fallen into its favour. Strong order booking for the recent launches has gain significant advantage in its industry segment. Company has raised prices for all of its products considering the demand available in the domestic market. The company will focus more on the exports end and is focussing mostly on its American business and the markets apart from the geographies it already exists in.
After recent cancellation of joint venture with Ford company has launched XUV700 which got significant bookings and has come up with the new brand symbol and thus resulted in company moving towards establishing foothold in the XUV segment .
State Bank of India : Target price set at Rs 680-700
STATE Bank of India is in the growth mode and is reporting better-than-expected numbers in the recent quarters. SBI if showing stellar performance in its recent quarters . S.BI stock price has come out its long term consolidation phase and is having target of 680-700 Rs in near term