Axis Top Picks basket gave impressive returns of 31% YoY & outperformed Nifty’s 8% return. Check new recommendations

Market Eyeing on a New High in Light of Favorable Macros

We are proud to share that our Axis Top Picks basket delivered impressive returns of 31% in the last one year till 1st Dec’23, beating the benchmark Nifty 50 index (8% return over the same period) by a wide margin. In Nov’23, the basket inched up further by 6% (till 1st Dec’23). We are extremely happy to inform you that our Top Picks Basket has delivered an astounding return of 231% since its inception (May’20). This stands well above the 119% return delivered by NIFTY 50 over the same period. Given these results, we maintain our confidence in our thematic approach to Top Picks selection.

Top stock recommendations 2024

We roll over Nifty target to Dec’24 at 23000

Base case: The Indian economy stands at a sweet spot of growth and remains the land of stability against the backdrop of a volatile global economy. We continue to believe in its long-term growth story, supported by the emerging favourable structure as increasing Capex enables banks to improve credit growth. These factors will ensure that Indian equities will easily manage to deliver double-digit returns in the next 2-3 years with the support of double-digit earnings growth. We foresee 14% CAGR growth in Nifty earnings over FY23-26. Our estimates of FY24/25 stand conservative at 5% below street expectations. Financials remain the biggest contributors for FY24/25 earnings. In Our base case, we assume the continuation of the political stability and consequent visibility on the policy continuity after the 2024 general elections.

In our base case, we roll over the Nifty target to Dec’24 to 23,000 by valuing it at 20x on Dec’25 earnings, implying an upside of 13% from the 1st Dec’23 levels. The current level of India VIX is below its long-term average, indicating that the market is currently in a neutral zone (neither panic nor exuberance). While the medium to long-term outlook for the overall market remains positive, we may see volatility in the short run with the market responding in either direction. Keeping this in view, the current setup is a ‘Buy on Dips’ market. We recommend investors maintain good liquidity (10%) to use any dips in a phased manner and build a position in high-quality companies (where the earnings visibility is quite high) with an investment horizon of 12-18 months.

Bull case: In the bull case, we value NIFTY at 22x, which translates into a Dec’24 target of 25,000 implying an upside of 23% from the 1st Dec’23 levels. Our bull case assumption is based on the overall reduction in volatility and the success of a soft landing in the US market. Currently, we are near the peak of the current rate hike cycle and the prospects of a soft landing have further strengthened in the last one month. The market is currently building an expectation of one rate cut by US FED around May-Jun’24 and developments regarding the same will be keenly watched by the street. If the market sails through the next 1 or 2 quarters smoothly, we would likely see the next level of triggers along with money flowing to EMs. In the Bull case, we foresee the Nifty earnings to grow at a CAGR of 16% from FY23-26. This, in turn, would increase the market multiple.

Bear Case: In the bear case, we value NIFTY at 16x, which translates into a Dec’24 target of 18,500, translating a downside of 9% from 1st Dec’23 levels. We assumed the market to trade at an average valuation led by political instability in case of no clear mandate in the 2024 general election. Adding to that, we assumed inflation continues to pose challenges in the developed world. Currently, we are near the peak of the rate hike cycle and the market has not seen such levels of interest rate hike in the recent past. Hence the chances to go wrong have increased significantly. This would translate into a slowdown or heightened recession in the developed market, which will impact the export-oriented growth in the domestic market. It will consequently pose challenges to the earnings and market multiple of the domestic market.

Based on the above themes, we recommend the following stocks: ICICI Bank, Maruti Suzuki India, State Bank of India, Lupin ltd, Federal Bank, Varun Beverages, TVS Motors, Bharti Airtel, PNC infra, ITC, Relaxo, CIE Automotive India, Bank of Baroda, Westlife Foodworld, CreditAccess Grameen, JTL Industries