Where To Invest In : 2021

Where To Invest In : 2021

Very few years in the history of equity markets have been as eventful as 2020. That makes 2021 extremely interesting for both bears and bulls as the markets are precariously poised at record highs. Geyatee Deshpande discusses how the year 2020 has been for equity investors and Vinayak Gangule shares his technical view on the markets while Yogesh Supekar forecasts what one can expect in 2021 even as the DSIJ research team highlights its ‘where to invest in 2021’ portfolio in this cover story 

Looking at the performance of the equity markets in 2020, it is normal to expect investors to be optimistic for the coming year i.e. 2021. The known factors are positive for the markets, as for example, vaccine development, economic recovery, expansionary fiscal and monetary policy, etc. and hence there is an air of cheerfulness as we cross the threshold to enter 2021. Businesses are attempting to get adjusted to the new normal post the pandemic and things are getting slowly but surely on track for corporate India. The damage to the balance-sheet of large, medium and small-sized companies, surprisingly, has been minimal despite the lockdowns and hence the recovery has been steady so far.

Corporate India is confident of fast recovery and profitability can be expected to improve in the coming quarters. Says Mateen Jahagirdar, who runs a private limited company in Maharashtra: “I run a medium-sized IT company. We are a digital content provider and I am extremely happy to say that the business for me has never been better. In 2021, I might expand my business and I do not see any signs of slowing down, at least in my field.” Indeed, the recovery is better than expected for several businesses, including manufacturing. Says R S Jalan, Managing Director, GHCL, “The pandemic has affected markets around the world. India declared a lockdown on March 24, 2020 to check the spread of the virus. As a result, our plants of soda ash, yarn and textiles were shut down in the last week of March.” 

“Subsequently, our soda ash plant opened in April and textiles in May. There was production loss due to the lockdown further amplified by low demand across sectors once the process of unlocking began. In the first quarter, the capacity utilisation in our soda ash business was around 50 per cent and margins were impacted due to softer pricing and low volumes. However, production has started to pick up in industries since then and there has been a lot of recovery in the demand for soda ash. Well into the second quarter of the fiscal, we are operating at 80-85 per cent of our capacity as there are positive indications in the market and we expect that by the fourth quarter, the demand for soda ash will reach its normal level,” he adds. 

“For the year as whole in the industry, there will be a demand erosion of 12 per cent largely due to the impact of the lockdown in the first quarter. In the textiles segment, initially, the major markets for both garments and apparel as well as home textiles were affected by the pandemic. We saw export order cancellations or deferral of orders leading to inventory build-up and expectation of slower realisation of export receivables. In spinning too, there was an oversupply situation due to a reduction in demand, which led to softer prices.

Subsequently, we saw an uptick in the demand for home textiles as many economies, especially America and Europe, which are our major markets, announced economic stimulus packages and people at home were spending money on household products. This encouraged the business to open up and many orders were reinstated due to significant positivity in the market,” he further states. 

Commenting on growth opportunities, Jalan states: “In the chemicals business we aim to ramp up our production capacity by 1,00,000 tons of which 50,000 tons will be in FY21 and 50,000 tons in FY22. This is approximately 10 per cent increase in our production capacity. Additionally, we are in the process of making our plant IoT-enabled and focusing on manufacturing excellence and digitization while exploring opportunities for backward integration to ensure further advantage in our bottom-line.” While most investors are optimistic, experts believe that volatility in the markets may continue in 2021 as the pandemic situation is expected to get worse before it improves. Also, the delay in stimulus by US and Euro zone can be a dampener even as the risk of inflation may impact market sentiments. 

2020 Equity Market Performance

The year 2020 saw some of the wildest swings investors may have witnessed in the history of the markets. There were some days when the markets dropped by several digits in a single day, making some fresh records on the amount of wealth destruction. However, the swift recovery in stock prices has left investors with net gains in 2020. The broad-based rally is confirmed by the fact that almost 274 stocks turned out to be multibaggers in 2020 on YTD basis. The year 2020 can also be said to be one of the better years for penny stock investors with as many as 116 penny stocks turning out to be multibaggers and almost 375 penny stocks delivering positive returns while as many as 520 penny stocks generating on an average 59 per cent returns in 2020. 

The small-cap universe also emerged as an outperformer with as many as 62 stocks turning out to be multibaggers and as many as 151 small-caps delivering more than 50 per cent returns. India markets outperformed most of the major indices in 2020 barring Nikkei, Kospi and Nasdaq which were up by 12.66 per cent, 26.05 per cent and 38.26 per cent, respectively. Sensex was up by 11.75 per cent in 2020 as of December 10. The table below highlights the Indian key benchmark indices performance versus the global indices.

"Our cycle, value and sentiment (CVS) investment decision-making process scores global equities as expensive, sentiment as overbought and the cycle as supportive."
-Andrew Pease, Russel Investments.

Sectoral Performance 2020

As can be seen, 2020 was majorly about the stocks that belonged to healthcare, IT and technology sectors as displayed in the performance of sectoral indices. BSE Bankex was the worst performing index amongst the list of sectoral indices, giving a dip of 4.23 per cent in the year followed by BSE Finance, BSE Oil and BSE Utilities indices yielding negative returns. Sensex surged up by 11.6 per cent and Nifty by 11.18 per cent. The top three stocks which pushed the Sensex higher are Infosys, HCL Technologies, Asian Paints Ltd. Infosys gained by about 57.83 per cent followed by HCL Technologies which gained by 50.65 per cent while Asian Paints increased by 40.5 per cent.

Considering the healthcare sector, the top three performing stocks were Biofil Chemicals and Pharmaceuticals Ltd., Praveg Communications (India) Ltd. and Zenith Healthcare Ltd. which gave massive rise in prices over the year. In the IT sector the top performing stocks were Tanla Platforms Ltd., Subex Ltd. and Trejhara Solutions Ltd. Looking at the banking sector, the three worst performing stocks were Yes Bank Ltd., Canara Bank and Union Bank of India. Yes Bank dropped down about 58.37 per cent whereas Canara Bank inched down about 43.47 per cent and Union Bank of India declined by 39.08 per cent. Indusind Bank, even though one of the worst performing Nifty stock on YTD basis, has actually managed to gain more than 300 per cent since March lows.

"We have entered a new investment order. The pandemic has accelerated profound shifts in how economies and societies operate. We see transformations across sustainability, inequality, geo-politics and macro policy. This is reflected in our 2021 investment themes: The new nominal, globalisation rewired and turbocharged transformations. The new investment order is still evolving, and investors will need to adapt. Yet, the features are becoming clear, and we believe there is a need for a fundamental rethink of portfolio allocations, starting now."

-Blackrock Investment Institute, 2021 Global Outlook.

"We have now transitioned to an early-cycle environment, which implies strong profit growth that we believe is not yet priced into markets, despite the market’s recent rally..."

-Andrew Sheets, Chief Cross-Asset Strategist, Morgan Stanley Research.

DSIJ Portfolio Performance

DSIJ’s ‘Where to Invest in 2020’ portfolio has a track record of beating the benchmark indices on a consistent basis. The 2020 portfolio has outperformed the benchmark by a good margin in spite of difficult market conditions and volatility in 2020. The equal weightage portfolio recommended for 2020 has delivered 21.89 per cent gains while BSE 500 index is up by 10.23 per cent and BSE Sensex has gained 7.10 per cent in 2020 as of December 3. The year 2020 was a topsy-turvy one which saw both huge draw-downs and equally high jumps in both key benchmark indices and broader market indices.

Stocks such as GMM Pfaudler, Dixon Technologies, Gujarat Gas and KNR Constructions have been the star performers of the DSIJ portfolio. Profits of nearly 33.76 per cent and 32.26 per cent were booked in Dixon Technologies and Gujarat Gas, respectively, while Phoenix Mills disappointed. Phoenix Mills is the only portfolio stock that delivered negative returns. Here is the detailed performance of the ‘Where to Invest in 2020’ portfolio:

Jyoti Roy DVP
(Equity Strategist), Angel Broking Ltd.

What is your outlook on cement stocks for 2021?

We are positive about the cement sector for FY 2021 as demand is expected to remain strong on account of the government’s focus on housing and revival in the infrastructure sector. Moreover, rural demand is also expected to remain strong due to buoyancy in the agriculture sector on the back of good monsoon and the government’s focus on doubling of farmers’ income.

What is your outlook on small-cap stocks?

As mentioned earlier, there has been a significant improvement in the breadth of the market rally over the past few months. We expect the broad-based rally to continue improving given the underlying economy and strong FII flows. While we expect the Nifty to deliver returns of 10-12 per cent over the next one year despite any near-term volatility, we believe that mid-cap and small-cap stocks should outperform the Nifty over the next one year.

What is your outlook on realty stocks and will construction stocks catch up in 2021?

Demand in the real estate sector has improved significantly over the past few months led by residential sector due to record low home loan rates and good offers from builders who are looking to clear existing inventories in order to raise liquidity in their balance-sheet. We believe that demand for real estate is expected to remain strong due to low interest rates and prices along with improvement in underlying economic conditions. We also expect the construction sector will do well given that work has picked up due to significant improvement in the pandemic situation.

Which sector stocks will you bet on for outperformance in 2021?

We have seen a significant improvement in the breadth of the rally over the past few months with cyclical and beaten down sectors also participating in the rally. While we expect sectors with strong revenue visibility like IT and pharmaceuticals to continue doing well, we expect cyclical sectors like automotive, cement and consumer durables to also do well given strong rebound in the economy over the past few months. Rural focused sectors like agrochemicals, two-wheelers and tractors should also continue to do well on the back of a buoyant agriculture sector and the government’s focus to double farmers’ income. Similarly, we expect companies with strong liabilities and asset franchises as well as differentiated business model in the BFSI space to also do well.

Deepak Jasani
Head of Retail Research, HDFC Securities

Which set of stocks do you think will outperform in 2021?

2021 may belong to cyclical stocks and small-cap or mid-cap stocks. PSU stocks also may do well. Within cyclical stocks, metals, oil and gas and financials stand out. PSU stocks may do well as the government may implement strategies to focus on market capitalisation optimisation in PSUs by various means. In any case, these stocks are not expensive and offer good dividend yields.

Will banking and financials outperform in 2021? Which banks would you pick for outperformance?

Banks and financials have risen quite well from the lows, except a few including PSUs. There is a bit of uncertainty on the asset quality front due to moratorium. The real asset quality situation will be clear when Q3 results will be out. However, ad hoc pandemic-related provisioning by a lot of banks may help in offsetting pressure on asset quality. If the actual asset quality pain is less than what is feared, we may witness these stocks seeing buying interest. SBI, ICICI Bank and Axis Bank among the large-cap banks can be outperformers although buying should be staggered in them.

Which Sensex stocks will you bet on for outperformance?

Infosys, HUL, SBI, ONGC and Sun Pharmaceuticals could be outperformers among the Sensex stocks.

What is your technical outlook on IT and pharmaceutical indices?

The IT index has more than doubled from March lows. Stocks have risen discounting the opportunities arising out of the pandemic-related challenges. On weekly charts the index is highly overbought and so are a lot of other indices and stocks. We think the index is yet to make a top although the rise from here could be gradual. The technical setup of the pharmaceutical index is almost similar to the IT index. However, here we feel that the corrections will be less in terms of value, though time-wise the corrections could last a bit longer. Here again a big portion of the rise has already happened and now the rise could be more stock-specific.

Rahul Sharma
Head – Technical & Derivatives Research, JM Financial Services Ltd. 

What are the key risks facing equity markets that investors should keep in mind while constructing a portfolio for 2021?

Markets are a great discounting machine and what we have seen in 2020 is probably one of the biggest opportunities of this decade. It started from a sharp fall of more than 16,000 points in March this year which was followed by slow and steady recovery which ensured that we wiped off all losses of the fall. From peak to bottom, Sensex has swung more than 20,000 points in calendar year 2020. This was largely a result of ample liquidity in emerging markets by FII's backed by the retail and HNI category broadening their participation especially in the Mid and Small cap space. It was FII's who had sold heavily when the going had got tough during lockdowns whereas the DII's were happily lapping up Indian equities. However in the penultimate two months of 2020, it's the DII's who are pulling out while FII's are making big ticket purchases in the cash segment. Going into 2021, some acrophobia or fear of heights is surely going to play on the minds of market participants which can only be relieved with some bit of correction. Either a consolidation or a correction will only make the overall trend of the markets healthier. We advise to avoid sectors and stocks which have already run up and look up to getting either defensives at moment or else wait for a dip to get into frontline quality names. It is said that markets are usually ahead of the time and the current equity market scenario is cheering the fact that the world may soon be back to the old normal. 

What is your December 2021 Sensex target?

While Sensex has more or less achieved its target for 2020, we believe that this is just the beginning on a new bull run. Historically, whenever markets have entered in deep bear markets, the years that have followed have been bullish ones. Technically, markets remain in blue sky territory above 42,500 and can achieve 50,000 mark by March 2021. One can look to accumulate on dips for a Sensex Target of 60,000+ by December 2021. 

What are your top Sensex stock bets?

Technically speaking, Telecom, Consumption and Auto stocks have more space left before they run into resistances. Bullish setups are seen on BHARTIARTL, NESTLE and MARUTI. Some corrections in the broader market will be ideal to improve the risk reward setups in stocks like TATASTEEL, ICICIBANK and ONGC. Support for Sensex is seen at 42,500 & 44,800. Resistance can be expected at 48,000 & 50,000. 

Technical Outook

Bank Nifty



Currently, Nifty index is trading 9.14 per cent above its prior all-time high of 12,430.50. However, despite having the highest weightage in Nifty, the banking benchmark index i.e. Bank Nifty is trading below its prior all-time high by nearly 6 per cent. In the first two quarters of the financial year, Bank Nifty was underperforming the benchmark index. 

However, from the low of 16,116.25, which was registered on March 24, 2020, the index has gained nearly 91 per cent while the majority of the gain was registered in the last 57 trading sessions. The index has gained almost 10,286 points or 50.41 per cent since September 24, 2020. Currently, all the constituents of the index are trading above its 200-DMA while the index itself is trading above its 200-DMA by over 34 per cent. However, after its sharpest move, the sign of exhaustion is clearly visible in the index as out of the last four weekly candles, three candles are small body & indecisive candles.

The indicators and oscillators are also supporting this phenomenon. The price has made three higher highs in recent times but most of the indicators, including the daily RSI, have not reached near the prior highs. The bearish diversion is clearly visible on the weekly and the daily commodity channel index (CCI). Further, on the daily chart, the MACD histogram is trading below its zero line. Hence, in the coming weeks, it will not be a surprise if we see the index stall its momentum and slid into a period of meaningful consolidation. 

However, any temporary cool-off towards the level of 28,500-28,000 should be used as an incremental buying opportunity for the upmove towards the prior high of 32,613 levels. We may witness a fresh round of upside if there’s any sustainable breakout above the level of 32,613. 

Nifty Mid-cap



Nifty Mid-cap index has given an upward sloping channel breakdown as on the weekend of February 28, 2020. Thereafter, the index has witnessed an almost 39 per cent fall in just five weeks. However, the index has formed a spinning bottom candlestick pattern as of March 27, 2020, and thereafter, maintained the rhythm of higher tops & higher bottoms. During the process, it has surpassed the resistance one after the other in the form of a 200-day SMA and prior swing high of 18,495.90 levels. From the low of 10,749.95, which was registered on March 24, 2020, the index has gained over 92 per cent. Also, the index has retraced almost 88.67 per cent of its prior fall, which started from its all-time high level of 21,840.85, registered on January 15, 2018, to the low of 10,749.95 level. 

Further, in the month of November 2020, Nifty Mid-cap index has witnessed the highest monthly gain in percentage terms since May 2009. The index has gained almost 2,648.60 points or 15.51 per cent. 

Currently, the index is trading above all the short and long-term moving averages. The index is meeting the criteria of Mark Minervini’s trend template. The current index price is above both the 150-day (30-weeks) and 200-day (40-weeks) moving average price lines. Moreover, the 30 and 40-weekly averages are trending up and at the same time, they are in the desired sequence. Also, the 10-weekly moving average is above both the 30 and 40-weekly moving averages. Talking about the indicators, the relative strength index (RSI), which is a momentum indicator, is trading in a bullish territory in all the timeframes. The weekly MACD is also suggesting a bullish momentum as it is trading above its zero line and signal line. 

Considering the current chart structure, we expect that Nifty Mid-cap is likely to outperform the benchmark index in CY2021. On the downside, the zone of 18,700-18,400 will act as major support for the index as it is the confluence of upward sloping trendline support, formed by connecting swing lows since March 2020 along with the 50-day EMA level. 

Market Outlook and Conclusion

While economic recovery is almost given, the only uncertainty surrounding the global economic bounce-back is its speed and timing. Experts believe that the V-shaped recovery process will bring business activities to the pre-pandemic level in the second half of 2021 while a few believe that complete recovery will happen only in 2022 even as a few cautious market participants speculate a full recovery is possible only in 2023. With no doubt about economic recovery and the interest rate stance taken by central banks keeping interest rates near zero, thus leading to surge in corporate profitability, all roads for long-term investors looking for outperformance have led to the equity markets.

The year 2021 could be a mixed bag for several asset classes; however, equities may outperform and a shift towards equity asset class is clearly on the cards in 2021. It is interesting to note that the global institutional investors are already in favour of emerging equities and see value in cyclical stocks in the emerging markets. This will ensure that the money flow from overseas will continue into the Indian markets in 2021. China could be the most favoured destination within the emerging markets space but India could be one of the biggest beneficiaries of foreign capital within the large Asian market space.

As the economy recovers from its recessionary period, it is common for cyclical stocks with value to outperform growth stocks with high valuation. It is also observed that the period following a sharp downturn is usually dominated by small-caps and non-US equities. The USD is expected to remain under pressure and hence emerging markets such as India may witness fresh round of liquidity gush in 2021. We could very well be at the beginning of a cyclical upturn which is not clearly visible to many market participants right now. However, investing early in such an early cyclical stage in spite of steep valuations in equity can fetch extremely good results over a longer investment horizon. 

Usually, such recovery in business cycle supported by government policies both fiscal and monetary helps small-caps and mid-sized companies relatively more than their large-cap peers. The year could well belong to small-caps and mid-caps of the investing world where there is some value left. The laggards or the neglected stocks could do the catching up in 2021. The first half of 2020 saw a huge shift in investors’ attitude towards IT and pharmaceutical stocks. There was an incremental demand for the defensives with a clear bias towards IT and pharmaceutical stocks in the first half which got reversed in the last three months of CY 2020.

We saw some selling pressure in IT and pharmaceutical stocks while some buying in cyclical stocks such as engineering and financials, including banking stocks. PSUs saw some buying as the dividend yield was tempting to several investors. This trend may continue for some time as we enter 2021. However, owing to superior earning growth and quality, in spite of rich valuation it will be hazardous to ignore IT and pharmaceutical stocks in 2021. One can expect 2021 to be lot more stockspecific when compared to 2020 even though the recovery has been broad-based in the recent few months. Investors are well-advised to be stock-specific and adopt a blend approach to portfolio construction which will facilitate a mix of value and growth stocks in the portfolio.

The performance of equities in 2020 has injected a lot of optimism in global investors, especially the retail investors who dominated market participation in 2020 when the markets collapsed. It is easy to carry the optimism in 2021 but investors must bear in mind that the volatility may continue in 2021, inflation may head higher than expected thereby triggering unfriendly policy actions by the governments of the world, unemployment may rise, recovery may be much slower than estimated, political uncertainty may increase, social unrest may reach new peaks and most importantly, taxes may increase in certain parts of the world, thus nullifying the global economic growth prospects. 

The expected returns are high in equity for 2021 but so are the risks. That said, the highest risk-adjusted returns can be delivered by equity as an asset class and hence investors can position themselves with higher exposure to the asset class in 2021. Investors can also have portfolio airbags in the form of defensives with decent exposure to FMCG, IT and pharmaceutical stocks with superior earnings’ growth and consistency. Further on we have our top recommendations for 2021 which we believe can outperform the markets. 

With a fresh new year around the corner and the markets continuing to do well, DSIJ has picked for existing and potential investors 10 best stock options to invest in 

Ajanta Pharma Amara Raja Batteries

BSE CODE : 532331 Face Value : Rs  2
52 WK High / Low : Rs 1,759.35 / 943
Mcap FF (Cr.) : Rs  4,266.95 CMP : Rs 1,686.45

Ajanta Pharmaceuticals is a specialty pharmaceutical company engaged in developing, producing and marketing a range of branded and generic formulations. Its business includes branded generics in the emerging markets of Asia and Africa, generics in the developed markets of the United States and institutional sales. The company serves a range of therapeutic segments such as antibiotic, anti-malarial, anti-diabetic, cardiology, gynaecology, orthopaedics, paediatric, respiratory and general health products. Looking at the quarterly trends on a consolidated basis, for Q2FY21 the company reported net sales of Rs 715.91 crore, an increase of 11.38 per cent as compared to the net sales of Rs 642.76 crore for the same quarter of the previous fiscal.

PBDT expanded by 50.15 per cent for Q2FY21 and was Rs 277.57 crore as compared to Rs 184.86 crore for Q2FY20. For the second quarter of FY21 the net profit also increased by 46.29 per cent to Rs 170.22 crore when compared to Rs 116.36 crore in the second quarter of the previous fiscal. In terms of annual results, net sales saw an increase of 25.91 per cent to Rs 2,587.87 crore in FY20 from Rs 2,055.37 crore in FY19. The company reported PBDT of Rs 759.69 crore in FY20, which is an increase of 29.56 per cent compared to Rs 586.35 crore in FY19. On the other hand, the company gained net profit of Rs 467.70 crore in FY20, which is a growth of 20.86 per cent compared to Rs 386.97 crore gained in FY19.

Compared to market estimates for Q2FY21, the company reported impressive results. Its branded US and Africa business led to growth while other geographical areas, including India, reported comparatively muted growth. India sales growth remained muted during Q2FY21 due to subdued recovery in the ‘acute’ portfolio including dermatology and ophthalmology whereas the ‘chronic’ segment posted improved performance. Better operating leverages in the US market as well as more capex expansion is expected to work as a growth driver for Ajanta Pharmaceuticals. Going ahead, the pharmaceutical space is expected to continue to remain a beneficiary of growth during the current pandemic situation. Hence, we recommend BUY.

Amara Raja Batteries

BSE CODE : 500008 Face Value : Rs  1
52 WK High / Low : Rs 963.95 /350.25
Mcap FF (Cr.) : Rs  7,637.78 CMP : Rs 943.25 

Amara Raja Batteries, the flagship company of the Amara Raja Group, is one of the largest manufacturers of lead acid batteries for both industrial and automotive applications. These batteries are exported to 32 countries across the globe. The company has a range of big players as its clients, namely, Tata Motors, Royal Enfield, Maruti Suzuki, Hyundai Motors, Renault Nissan, Honda Cars and Honda Motors. On the quarterly front and on a consolidated basis, the company posted net sales of Rs 1,935.52 crore in Q2FY21, an increase of 14.17 per cent compared to Rs 1,695.31 crore reported in Q2FY20. Its operating profit for Q2FY21 expanded by 13.37 per cent to Rs 351.45 crore from Rs 309.99 crore reported in Q2FY20. 

The company gained net profit of Rs 201.27 crore in Q2FY21, a decrease of 7.93 per cent compared to the net profit of Rs 218.61 crore gained in Q2FY20. On the annual front, Amara Raja Batteries reported net sales of Rs 6,839.17 crore in FY20 which is a fractional increase of 0.68 per cent compared to the net sales of Rs 6,793.11 crore posted in FY19. Operating profit rose by 15.56 per cent in FY20 to Rs 1,153.59 crore compared to Rs 998.26 crore reported in FY19. The company gained net profit of Rs 660.80 crore in FY20, increasing by 36.75 per cent compared to the net profit of Rs 483.23 crore gained in FY19. Amara Raja Batteries has taken a step further to enter the electric vehicle segment by collaborating with the US-based Gridtential Energy to invest in lead batteries with silicon at its core. 

These batteries will implement patented silicon joule bipolar technology which will be used for hybrid automotive, low-speed electric vehicles, energy storage systems and home backup systems. This financial year, the company is going to expand its main business and scale up the e-rickshaw division. This proposed expansion will include a greenfield unit for a third automotive battery plant which will produce about 6 million batteries over time while two more facilities will produce 2 million batteries separately. It is expected that the company will be able to increase its market share in lead acid battery business with increased capacity in manufacturing, which may attract new clients. Hence, we recommend BUY.

Cholamandalam Investment and Finance Company

BSE CODE : 511243 Face Value : Rs  2
52 WK High / Low : Rs 394.30 / 117.40
Mcap FF (Cr.) : Rs  14,396.55 CMP : Rs 377.05 

Cholamandalam Investment and Finance Company (CFIC) is engaged in the financial services sector. It was initially started as a equipment financing company but today has become a well-known name among the comprehensive financial services providing firms. The various products of the company include vehicle finance, loan against property, home loans, SME loans, rural and agricultural loans, wealth management and securities. CFIC operates with two subsidiaries, namely, Cholamandalam Securities Limited (CSEC) and Cholamandalam Home Finance Limited (CHFL).

On a quarterly consolidated financial front, the income from interest was reported at Rs 2,357.95 crore for Q2FY21, which is an increase by 13.85 per cent as compared to Rs 2,070.96 crore reported for Q2FY20. The total income calculated for Q2FY21 rose up by 15.4 per cent to Rs 2,439.78 crore from Rs 2,113.65 crore in Q2FY20. For Q2FY21, the company incurred net profit of Rs 431.91 crore as against net profit of Rs 430.93 crore in Q2FY20. On the annual front, for FY20 the company posted interest income of Rs 8,124.65 crore, an increase by 23.5 per cent compared to Rs 6,576.22 crore for FY19. The total income for FY20 rose by by 22.5 per cent to Rs 8,712.63 crore from Rs 7,108.83 crore for FY19. For FY20, the company reported net profit of Rs 1,053.72 crore as against net profit of Rs 1,196.59 crore for FY19.

CFIC has an improved credit risk profile and healthy market segment. Even in times of weak economic environment during the pandemic, CFIC was able to manage the collections and asset quality, bearing the impact of underlying borrower cash flows. Taking into account its growing financial performance as well as the sustainability of the healthy state of the company, we recommend BUY.

Divi’s Laboratories

BSE CODE : 532488  Face Value : Rs  2
52 WK High / Low : Rs 3,763.40 / 1,632.70
Mcap FF (Cr.) : Rs  46,051.37 CMP : Rs 3,627.40 

Divi’s Laboratories is a well-known name in the pharmaceutical sector. It manufactures and produces hundreds and thousands of tons of active pharmaceutical ingredients (APIs) and is among the top pharmaceuticals companies in this sector. Divi’s Laboratories is considered as a reliable supplier of generic APIs. It has its spread across 95 countries and is able to bag the position of being among the top three manufacturers of APIs in the world and the top API manufacturer in Hyderabad. Divi’s Laboratories operates in mainly three segments, namely, generic APIs, custom synthesis and nutraceuticals. Taking into consideration the consolidated financial statements on a quarterly basis, the net sales grew by 21.01 per cent to Rs 1,749.30 crore in Q2FY21 as compared to Rs 1,445.57 crore in Q2FY20. 

The operating profit recorded in Q2FY21 was Rs 754.78 crore, up by 40.4 per cent as compared to Rs 537.59 crore reported in the same quarter in the previous financial year. For Q2FY21, the company saw an increased net profit of Rs 519.59 crore, up by 45.63 per cent as compared to Rs 356.78 crore in Q2FY20. On an annual front, the company reported net sales of Rs 5,394.42 crore in FY20, yielding an increase of 9.06 per cent as compared to net sales of Rs 4,946.26 crore in FY19. The operating profit came in at Rs 2,011.80 crore in FY20 as compared to Rs 2,027.47 crore in FY19, a decline of 0.77 per cent on the annual basis. The PAT was Rs 1,376.54 crore in FY20 as compared to Rs 1,352.74 crore in FY19, a rise of 1.76 per cent. 

Perhaps the decline in annual operating profit can be due to the increase in manufacturing costs and employees of 19.2 per cent and 14.53 per cent in Q2FY21 as compared to Q2FY20. Going forward, Divi’s Laboratories is expected to have a strong operating income, healthy profitability margins and also good debt coverage ratio. It also depicts experienced management and promoters and also has a strong track record in contract research and manufacturing services (CRAMS). Taking into consideration the overall growth in financials and the need for well-established and well-experienced pharmaceutical companies like Divi’s Laboratories in the future, we recommend BUY

Federal Bank

BSE CODE : 500469 Face Value : Rs  2
52 WK High / Low : Rs 96.95 / 35.70
Mcap FF (Cr.) : Rs  13,643.80 CMP : Rs 67.40 

Among the commercial banks in the country, Federal Bank is considered to be notable player. Federal Bank operates through four segments, namely, treasury, wholesale banking, retail banking and other banking operations. It works with large number of remittance networks across the world. The bank defines its vision to become the most admired bank which is digitally enabled and also focuses on micro, medium and middle market enterprises. 

On the quarterly front, the net interest earned by the bank in the second quarter of FY21 came in at Rs 3,487.90 crore as against Rs 3,254.25 crore in the corresponding quarter of the previous fiscal, an increase of 7.18 per cent. The total income in Q2FY21 was Rs 3,997.23 crore, an increase of 8.76 per cent from Rs 3,675.17 crore in Q2FY20. 

There was a decrease of 26.18 per cent in profit after tax, which touched Rs 307.62 crore in Q2FY21 from Rs 416.70 crore in Q2FY20. For Q2FY21 the GNPA percentage was 2.84 per cent as compared to 3.07 per cent in Q2FY20. The CRAR ratio in Q2FY21 was 14.64 per cent while in Q2FY20 it was 13.98 per cent. Net interest earned by the bank in FY20 came in at Rs 13,210.75 crore, an increase of 15.69 per cent from Rs 11,419.03 crore in FY19. The total income earned by the bank in FY20 was Rs 15,142.16 crore, an increase of 20.69 per cent from Rs 12,770.05 crore earned in the previous fiscal. 

The profit after tax in FY20 increased by 24.03 per cent to reach Rs 1,542.78 crore as against Rs 1,243.89 in FY19. The company reported GNPA ratio of 2.84 per cent for FY20 and 2.92 per cent for FY19. In FY20 the CRAR ratio was 14.35 per cent whereas in FY19 it was 14.14 per cent. There is overall potential growth in the private sector banks with each player striving to opt for updated digital innovation to provide the best services to its customers.

Federal Bank reflects comfortable capitalisation, good resources and a strong brand presence among NRIs. Considering these parameters we recommend BUY

HDFC Bank

BSE CODE : 500180 Face Value : Rs  1
52 WK High / Low : Rs 1,464.00 /738.90
Mcap FF (Cr.) : Rs  5,59,033.82 CMP : Rs 1,390.40
 

HDFC Bank is one of India’s largest private sector banks by assets and by market capitalisation with a customer base of over 5.6 crore. It has a strong network across the country with 5,133 branches in 2,848 cities. HDFC Bank has adapted itself according to the market requirements and is now a technology-led bank. Along with these services, its digital products include ‘Pay Zapp’ and ‘Smart Buy’. On the quarterly front, the net interest earned by the bank in the second quarter of FY21 came in at Rs 29,976.97 crore as against Rs 28,166.28 crore in the corresponding quarter of the previous fiscal, an increase of 6.43 per cent. 

The profit after tax rose by 18.41 per cent to reach Rs 7,513.11 crore in Q2FY21 from Rs 6,344.99 crore in Q2FY20. For Q2FY21 the GNPA percentage was 1.08 per cent as compared to 1.38 per cent in Q2FY20. The CRAR ratio in Q2FY21 was 19.1 per cent and in Q2FY20 it was 17.5 per cent. Net interest earned by the bank in FY20 came in at Rs 1,14,812.65 crore, an increase of 16.01 per cent from Rs 98,972.05 crore in FY19. 

The profit after tax in FY20 increased by 24.57 per cent to reach Rs 26,257.32 crore as against Rs 21,078.14 in FY19. The company reported GNPA ratio of 1.26 per cent for FY20 and 1.36 per cent for FY19. In FY20, the CRAR ratio was 18.5 per cent whereas in FY19 it was 17.1 per cent. The credit cards’ segment grew by around 6 per cent QoQ in Q2FY21 and customer spending is back to the pre-pandemic levels. 

Corporate growth remains robust and the bank continues to focus on high-rated borrowers. HDFC bank has reported around 97 per cent collection efficiency in the quarter ended September 2020, which boosts confidence regarding its asset quality as well the outlook for the bank and also the broader retail cycle. Despite margin pressure, the bank aims to continue to maintain a strong operating performance. Given its intent to make healthy provisions to further strengthen the balancesheet, HDFC Bank has a positive outlook going forward. Hence, we recommend BUY

Infosys

BSE CODE : 500209 Face Value : Rs  5
52 WK High / Low : Rs 1,185.00 / 511.10
Mcap FF (Cr.) : Rs  4,26,737.27 CMP : Rs 1,154.40 

Infosys is engaged in consulting, technology, outsourcing and next-generation services. The company, including its subsidiaries, provides business information technology services comprising application development and maintenance, independent validation, infrastructure management, engineering services consisting of product engineering, lifecycle solutions and business process management, consulting and system integration services comprising consulting, enterprise solutions, etc. Its segments include financial services and insurance (FSI), manufacturing and hi-tech (MFG and HI-TECH), energy and utilities, communication and services (ECS), retail, consumer packaged goods and logistics (RCL) and life sciences and healthcare (LSH). 

On a quarterly consolidated front, the net sales increased by 8.58 per cent in Q2FY21 to Rs 24,570 crore from Rs 22,629 crore in Q2FY20. The company reported an operating profit of Rs 7,653 crore in Q2FY21, increasing by 22.15 per cent as compared to the operating profit of Rs 6,265 crore reported in Q2FY20. Similarly, net profit rose by 20.34 per cent to Rs 4,858 crore in Q2FY21 as compared to Rs 4,037 crore gained in the same quarter for the previous fiscal year. On an annual front, the company reported net sales of Rs 90,791 crore in FY20, up by 9.82 per cent from Rs 82,675 crore reported in FY19. Operating profit grew by 8.75 per cent to Rs 25,070 crore in FY20 as compared to Rs 23,052 crore reported in the previous fiscal year. 

Net profit saw growth of 7.98 per cent to Rs 16,639 crore in FY20 as compared to Rs 15,410 crore reported in FY19. Infosys is considered as a key beneficiary of the recovery in the IT spends of FY22 as the company holds a strong market leadership position. Margin expansions with continued focus on investing in automation and digital capabilities will support the company’s growth trend. Additionally, Infosys Cobalt, which is its cloud brand in the IT services market, is expected to drive huge market opportunities going forward. Infosys also has multiple long-term contracts with the world’s leading brands. Hence, considering the overall positive momentum, we BUY.

ITC

BSE CODE : 500875  Face Value : Rs  1
52 WK High / Low : Rs 247.90 / 134.95
Mcap FF (Cr.) : Rs  1,86,396.69 CMP : Rs 213.40 

ITC is engaged in the marketing of fast moving consumer goods (FMGC). Its FMCG segment includes products related to cigarettes and cigars and branded packaged foods along with other businesses such as staples, snacks and meals, dairy and beverages, apparel, education and stationery products as well as personal care products, safety matches and incense sticks. ITC has a hotel, paper and packaging, and an agricultural segment as well. 

The company’s popular brands include Aashirvaad, Sunfeast Dark Fantasy, Classmate, Fiama Di Wills, Vivel, Wills Lifestyle, John Players, etc. On a consolidated quarterly front, its net sales grew by 2.47 per cent in Q2FY21 to Rs 13,075.14 crore from Rs 12,759.44 crore in Q2FY20. The company reported an operating profit of Rs 4,983.25 crore in Q2FY21, down by 8.93 per cent from Rs 5,471.94 crore in the corresponding period for the previous fiscal year. The company reported net profit of Rs 3,418.69 crore in Q2FY21, decreasing by 18.09 per cent from Rs 4,173.72 crore in Q2FY20. 

On an annual basis, net sales reported for FY20 were Rs 50,968.50 crore, up by 3.28 per cent from Rs 49,348.43 crore in FY19. Operating profit for FY20 was reported at Rs 21,858.05 crore, up by 6.21 per cent from Rs 20,580.15 crore in the previous fiscal year. Similarly, net profit rose by 21.52 per cent in FY20 to Rs 15,584.57 crore from Rs 12,824.20 crore in FY19. The cigarette business reported strong recovery in terms of volumes and revenue and company’s hotel business continued to remain adversely impacted due to restrictions on travel and tourism and also closure. 

The company has tried diversifying its services with the inclusion of more food deliverables and packaged food categories since snacking has been on a rise while people remain at home, and even work from there. Revival in business and leisure travels will slowly boost its hotel segment as well. Currently the company’s FMCG business remains the key growth factor for the company and ITC is expected to see considerate demand in this segment. Hence, looking at the positive outlook for the coming quarters we recommend BUY.

Mindtree

BSE CODE : 532819 Face Value : Rs  10
52 WK High / Low : Rs 1,605.45 / 691.95
Mcap FF (Cr.) : Rs  6,127.89 CMP : Rs 1,468.45 

Mindtree is a global technology consulting and services company. The company offers an array of services including product and service innovation, digital marketing, application networks and automation. It has ventured into data and intelligence with Internet of things (IoT), provides cloud services and digital security as well. It delivers digital transformation from ideation to execution, creating customised solutions across the digital value chain. On a consolidated basis, for Q2FY21 the company reported increase in net sales by 0.61 per cent to Rs 1,926 crore from Rs 1,914.30 crore in Q2FY20. 

Operating profit expanded by 54.83 per cent to Rs 414.80 crore in Q2FY21 as compared to Rs 267.90 crore in Q2FY20. Company's total income reported in Q2FY21 is Rs.1950.5 crore, an 0.85% increase from Rs.1934 crore reported in Q2FY20. The company gained net profit of Rs 253.70 crore in Q2FY21, which is an increase by 87.93 per cent compared to Rs 135 crore gained in Q2FY21. Despite the pandemic the company ended the quarter with a bang, a healthy order book of USD 391 Million. On the annual front, for FY20 Mindtree’s net sales rose by 10.58 per cent to Rs 7,764.30 crore from Rs 7,021.50 crore reported in FY19. Operating profit expanded by a mere 0.29 per cent to Rs 1,157.10 crore in FY20 from Rs 1,153.80 crore reported in FY19. Total Revenue had a growth of more than 10% from Rs.7110.8crore in FY20 to Rs.7839.9 crore in FY21. The company reported net profit of Rs 630.90 crore in FY20, contracting by 16.34 per cent compared to the net profit of Rs 754.10 crore reported in FY19. 

Due to Covid-19, we are observing an increase in cash conservation and reduction in Capex outlays. Mindtree aims to strengthen its focus on sectors like retail, banking, travel, hospitality, insurance, financial services, and media and technology in order to cash in on the opportunities this trend reversal presents. The company’s management also intends to build on existing strengths, enhance focus on growth opportunities and develop strategic relationships to boost its growth trend. Looking at Mindtree’s positive growth potential, we recommend BUY.

Tata Motors

BSE CODE : 500570 Face Value : Rs  2
52 WK High / Low : Rs 201.80 / 63.60
Mcap FF (Cr.) : Rs 31,917.44 CMP : Rs 178.80 

Tata Motors is a manufacturer of motor vehicles. It is engaged mainly in the business of automobile products consisting of all types of commercial and passenger vehicles, including financing of the vehicles sold by the company. Its automotive segment operations include all activities relating to the development, design, manufacture, assembly and sale of vehicles, including vehicle financing, as well as sale of related parts and accessories wherein Tata Motors manufactures and sells passenger cars, utility vehicles, light commercial vehicles, and medium and heavy commercial vehicles. Tata Motors’ operations segment mainly includes IT services and machine tools and factory automation services. Looking at the quarterly trends on a consolidated basis, for Q2FY21 the company reported net sales of Rs 52,839.02 crore, a decrease of 18.41 per cent as against net sales of Rs 64,763.39 crore for the same quarter of the previous fiscal. 

PBDT also decreased by 19.15 per cent for Q2FY21 and was Rs 4,786.80 crore as compared to Rs 5,920.80 crore for Q2FY20. For the second quarter of FY21 the company reported net loss of Rs 343.28 crore as against net profit of Rs 175.76 crore reported in Q2FY20. In terms of annual results, net sales saw a decrease of 13.57 per cent to Rs 2,58,594.36 crore in FY20 from Rs 2,99,190.59 crore in FY19. Operating profit decreased by 24.14 per cent to Rs 20,960.22 crore in FY20 from Rs 27,629.64 crore in FY19. Tata Motors had reported net loss of Rs 10,975.23 crore in FY20 while it reported net loss of Rs 28,933.70 crore in FY19. 

Jaguar Land Rover’s (JLR’s) retail volumes are also seen improving from the pandemic period’s lows and Tata Motors reported of normalisation of system inventories. According to industry experts, since the company is one of the market leaders in the automotive sector and also has a diversified portfolio, a double-digit volume growth at JLR can possibly be seen in the coming fiscal years. The recent launch of ‘Defender’ also received an encouraging response, which is further expected to boost revenue growth for the company. Hence, looking at the recovering trend of the automotive sector and subsequent positive future growth, we recommend BUY.

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