NEW DELHI: Amid stock market volatility and expensive valuations, there is still a 'sweet spot' for investors to find attractive opportunities among large-cap stocks, according to brokerage firm ICICI Securities.
"Key sectors where the bellwether stock’s earnings growth expectations over FY22E-FY24E will exceed or keep pace with nominal GDP growth of around 13% while yielding around 5% or above fulfill our criteria of being attractive. Current environment of earnings upgrade cycle provides additional comfort on the sustainability of the consensus earnings growth estimate over FY22-24," said research analyst Vinod Karki.
The following stocks fulfill ICICI Securities’ criteria of being in the sweet spot of strong earnings growth expectations and high earnings yield:
Morgan Stanley expects Sensex to rise 21% in a year
Meanwhile, a month after it downgraded Indian markets, Morgan Stanley now expects the outlook for domestic stocks to improve even as volatility persists. India appears to be in a structural uptrend with a likely new profit cycle, supportive policy, likely rise in fixed income flows, new issuances and falling return correlations with the world, it said in a report. Morgan Stanley, however, retained India's rating at 'equal-weight', after having downgraded the domestic market from 'overweight' on Oct. 27, citing high valuations and Fed taper fears.
"We expect earnings to compound 27% annually over the next couple of years and the Sensex to rise 21% in our base case to 70,000 (December 2022), suggesting that index returns are likely to trail earnings growth in 2022."
Stronger earnings in the second half of the year, fiscals 2023 and 2024 will prove to be a catalyst in achieving targets, it added.
India’s inclusion in the bond index, a BJP win in the upcoming UP elections and rising capex is also likely to spur growth, it said.
