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Since last Diwali, the Nifty index has gained approximately 25%. However, JM Financial has pointed out some short-term risks that could affect this growth. These include the recent rise in crude oil prices, concerns about a global economic slowdown, and ongoing geopolitical tensions.
JM Financial, a well-known domestic brokerage firm, has recommended a list of 10 stocks to consider buying this Diwali, with expected returns ranging from 15-28% in Samvat 2081. Among the suggested stocks are prominent companies like Reliance Industries, Bajaj Finance, Power Grid Corporation of India, Jindal Steel & Power (JSPL), and Ashoka Buildcon.
While the Nifty has surged by around 25% since last Diwali, JM Financial emphasizes the potential short-term risks posed by factors such as the rise in crude oil prices, concerns over a global economic slowdown, and ongoing geopolitical tensions, all of which could impact the nation’s GDP growth.
1. Reliance Industries Ltd
Reliance Industries Ltd. (RIL) is a highly diversified company with operations spanning several sectors, including oil-to-chemicals (refining and petrochemicals), exploration and production (E&P), digital services, retail, media, and new energy. The company is focused on enhancing its revenue from the Jio and retail segments over the next 3-4 years. Additionally, its emphasis on green energy positions it well for long-term growth.
Earnings are expected to see steady growth across all its segments. JM Financial forecasts that RIL could achieve an annual profit growth (PAT) of 15% from FY24 to FY27. The brokerage has set a target price of Rs 3,500, indicating a potential upside of around 28% within the next 6-12 months.
2. Power Grid Corporation of India Ltd
Power Grid Corporation of India Ltd. (PGCIL) is India’s largest power transmission company, managing approximately 45% of the nation’s electricity. It owns and operates the majority of India’s inter-regional and interstate transmission networks.
With substantial growth potential in the transmission sector expected through 2032, PGCIL’s planned capital expenditure and its regulated business model provide strong earnings stability. JM Financial has set a target price of Rs 383 for the stock, suggesting a potential upside of 17% over the next 6-12 months.
3. Bajaj Finance Ltd
Bajaj Finance is a leading player in retail lending, offering a wide range of consumer loans, including those for two- and three-wheelers, housing, gold, and MSME financing. The company has consistently increased its assets under management and is focusing more on secured loans in line with RBI guidelines. With one of the largest deposit bases among NBFCs at Rs 63,000 crore, Bajaj Finance is well-positioned for growth, especially as the festive season is expected to boost demand.
JM Financial has set a target price of Rs 8,552 for Bajaj Finance, suggesting a potential 18.6% upside.
4. ICICI Lombard General Insurance Ltd
ICICI Lombard is the second-largest general insurer in India, trailing only New India Assurance Co., with an 8.6% market share of FY24 premiums. The company leads the motor insurance segment and is the top private insurer in key commercial sectors such as fire, engineering, marine, and liability. Additionally, ICICI Lombard is experiencing rapid growth in the health insurance sector.
JM Financial has set a target price of Rs 2,450 for ICICI Lombard, indicating a potential 17% upside over the next 6-12 months.
5. Jindal Steel & Power Ltd
Jindal Steel and Power (JSPL) is a leading steel manufacturer in India, currently producing 9.6 million tons per year (mtpa). The company is investing heavily in expanding its crude steel production capacity by 65%, which will increase its capacity to 15.9 mtpa. This expansion is set to significantly boost production and position JSPL as the fourth-largest steel manufacturer in India by FY26.
JM Financial has set a target price of ₹1,150 for JSPL, suggesting a potential 19% increase.
6. Nalco Ltd
Nalco is a public sector company, with the Indian government holding a 51.3% stake as of June 30. It is one of India’s largest producers of bauxite, alumina, and aluminum, with aluminum production of 0.46 million tons and alumina production of 2.12 million tons in FY24. The company’s alumina export sales reached 1.17 million tons in FY24.
Nalco’s plans to expand its alumina refinery, raise alumina prices, and achieve cost savings from captive coal mining are expected to drive earnings growth. JM Financial values the stock at ₹264, indicating a potential 17% increase over the next 6-12 months.
7. Gravita India Ltd
Gravita India is a prominent player in the recycling industry, focusing on three main areas: lead, aluminum, and plastics. The company plans to expand into other sectors, such as steel, paper, and lithium-ion batteries. As one of the largest lead recyclers in India, Gravita derives 82% of its earnings before interest, taxes, depreciation, and amortization (EBITDA) from lead recycling.
According to JM Financial, the company’s capital expenditure plans and supportive regulatory changes present strong growth opportunities for its recycling business. They have set a target price of ₹3,068 for the stock, indicating a potential 21% increase.
8. Macrotech Developers Ltd
According to JM Financial, Macrotech Developers, also known as Lodha, is set to strengthen its leadership in the real estate market. This growth is driven by its effective sales strategy and a well-balanced portfolio of projects, including premium, mid-income, and affordable housing, along with favorable conditions in the residential market. Lodha is also expanding into logistics parks, commercial spaces, and retail, as part of its mixed-use developments, further solidifying its position as a leading developer across various categories and customer segments.
JM Financial highlighted that Macrotech has a strong track record of creating residential townships that generate consistent cash flow and is focusing on adding more asset-light projects. They have set a target price of ₹1,480 for the stock, indicating a potential 23% increase.
9. Olectra Greentech Ltd
Olectra is one of India’s largest manufacturers of electric buses and plays a significant role in the electric vehicle (EV) market. The company has established a modern plant in Hyderabad with an annual production capacity of 5,000 electric buses, which could potentially expand to 10,000 units per year. Operations at this new facility have already commenced.
Olectra’s partnership with BYD, coupled with the growing demand for electric buses and a robust order book, offers substantial growth opportunities. JM Financial has set a target price of ₹2,200 for the stock.
10. Ashoka Buildcon Ltd
Ashoka Buildcon Ltd provides a wide range of construction services, including the development of roads, bridges, and power transmission and distribution projects. It is a key player in the BOT (Build, Own, Transfer) segment and has recently expanded into the CGD (City Gas Distribution) market.
The company’s performance is expected to improve, driven by its diverse order book, strong execution skills, anticipated acceleration in project execution, and reduced debt. JM Financial has set a target price of Rs 290 for the stock.
Conclusion
As Diwali 2024 approaches, investors are looking for opportunities to strengthen their portfolios. The 10 stocks featured here, including industry giants like Reliance Industries, Bajaj Finance, and Jindal Steel & Power, are projected to deliver promising returns of 15-28% over the next 6-12 months. These companies are well-positioned for growth thanks to their strong fundamentals, diversified operations, and favorable market conditions. Keep an eye on these stocks as you shape your investment strategy this festive season.
