Enter Samvat 2080 with these Diwali pataka stocks

• Large-cap stocks offer better reward-risk balance given more reasonable valuations say experts in their Diwali picks.
• BSFI, domestic upcycle theme along with real-estate, power and infra amongst Diwali picks by brokerages.
• Defence and railway stocks like MTAR Technologies, HAL, Titagarh Wagons also made it to the best Diwali stock picks for Samvat 2080.
  

The Diwali festive fervour is here and the Indian stock markets will soon end Samvat 2079 after hitting many milestones. Not only did the benchmark indices gain 6% during the year — Nifty touched 20,000 and Sensex surpassed 67,900.

The equity markets have also shown extreme resilience in times of many geopolitical uncertainties like the Israel-Hamas conflict on top of the Russia-Ukraine war, rising inflation, sharp uptick in bond yields and more.

For investors who are looking to build an auspicious portfolio for Samvat 2080, experts advise restraint and pick stocks that stand tall amidst corrections.

“The recent sharp correction in stock prices may reflect growing recognition of short-term and medium-term challenges or a natural correction in the market from high levels. In our view, large-cap stocks offer better reward-risk balance given more reasonable valuations versus lofty valuations of most mid- and small-cap stocks,” says Kotak Securities.

According to the brokerage firm, short term challenges include higher-for-longer interest rates, and weak domestic consumption. It also expects disruption across sectors as a medium term challenge. Going ahead, it sees value in BFSI stocks, while Sharekhan sees value in domestic upcycle themes, with a few others that can leverage greenshoots in the export market.

“Investors should view the current market weaknesses as valuable buying opportunities for constructing a top-tier portfolio aimed at riding the multi-year economic upcycle in India and use the opportunity for wealth creation over the next few years. Corporate earnings are expected to grow at a CAGR of 15% for the next two years, with over 20% earnings growth anticipated in the BSE 200 over the same period,” says Sharekhan.

Here are a few stocks picked across brokerages’ Diwali picks.

Best of the best: Diwali picks with rocket-like returns

RIL rules, but DLF and small caps on the list too

Most of the Diwali picks of stocks veered towards a good balance of large caps. But a few high performing small cap stocks such as RVNL, Gokaldas Exports, Garware Hitec, Syrma SGS made it to the pataka stock lists compiled across brokerages.

The most common name across lists is Reliance Industries, as companies see good upside in the stock in the next few years. J M Financial says that RIL’s net debt concerns are overdone, and that it has industry leading capabilities across businesses to drive robust 14-15% earnings per share (EPS) compounded annual growth rate (CAGR) over the next 3-5 years.

“Jio’s ARPU expected to rise at 10% CAGR over FY23-28 with ARPU being on a structural uptrend given the industry structure, future investment needs, and the need to avoid a duopoly market. Further, strong growth momentum continues in the company’s Retail business as RIL is driving omni-channel capabilities across segments,” the brokerage says.

The next most common stock across Diwali picks is DLF. Even as Kolte Patil, Lodha and Godrej Properties were also picked as the real estate sector theme remained strong, this mega developer made it to three brokerages’ best picks.

“DLF's strong leadership in the Delhi-NCR region, a vast residential project pipeline, a significant rental portfolio, ample land reserves with low carrying costs, and favourable market conditions create a promising environment for substantial growth,” said Anand Rathi.

Banks were also part of each brokerage’s picks with Union Bank of India, ICICI Bank, Bank of India, Axis Bank making the cut. Most of them back defence and railway stocks as well like HAL, Titagarh Wagons and MTAR Technologies – all which have given good returns this year.

Auto stocks like M&M, TVS Motor, Tata Motors, Maruti and Ashok Leyland also rode into the Diwali picks, with a good mix of power and infrastructure stocks like Tata Power, Power Grid, BHEL and L&T are expected to light-up portfolios on the day India will glow with the light of diyas.