Emkay Foresees Bullish Market Wave, Identifies Key Beneficiaries and Top Picks

Emkay Foresees Bullish Market Wave, Identifies Key Beneficiaries and Top Picks

VoM News Desk | December 18, 2023 | 05:14 PM IST | Breaking News | Follow on Google News

Emkay Foresees Bullish Market Wave, Identifies Key Beneficiaries and Top Picks Image/Mint

Emkay Foresees Bullish Market Wave, Identifies Key Beneficiaries and Top Picks

In response to the Federal Reserve’s dovish stance, domestic brokerage house Emkay anticipates an additional bullish wave in the market.

The combination of post-election policy stability, sustained capex strength, and the manufacturing cycle is predicted to bolster equity market performance. Emkay advises investors to leverage technical corrections as opportunities to boost exposure.

The brokerage notes that lower rates’ earnings impact is subdued but foresees higher Foreign Portfolio Investment (FPI) flows driving re-rating.

This, combined with policy stability and capex strength, is expected to support continued equity strength.

Emkay identifies potential beneficiaries from falling rates, including mid-size lenders like IndusInd Bank and IT companies such as Infosys.

Additionally, it highlights Hero MotoCorp, Piramal Enterprises, and Zomato as top picks, noting the latter as a new addition to its list.

Looking ahead, the brokerage foresees a turning point in the rate cycle, aligning with the Fed’s dovish comments suggesting three rate cuts in CY24.

It expects the Reserve Bank of India (RBI) to follow suit with concurrent rate reductions, with a more pronounced impact on the short end of the yield curve.

Emkay emphasizes that the real economy might experience limited impact due to low corporate leverage levels.

It identifies potential beneficiaries, including banks with low floating-rate loans, short-term funded non-housing Non-Banking Financial Companies (NBFCs), life insurance firms, and the real estate sector.

The report underscores FPI flows as a significant trigger, projecting India to remain an attractive emerging market amidst challenges in investing in China. Emkay acknowledges historical noise during initial rate-cut cycles but highlights the distinct features of the ongoing cycle, which starts amid robust growth.

However, the brokerage notes challenges in identifying stocks meeting criteria like earnings visibility, growth sustainability, and relative valuations to history amid re-rating.

Emkay favors small and medium-sized enterprises (SMIDs) and the manufacturing sector but holds a cautious stance on consumption, except for autos.

Reiterating top picks as IndusInd Bank, Piramal Enterprises, and Hero MotoCorp, Emkay also includes Infosys due to minimal near-term earnings risk and reasonable valuations historically. Zomato is added as it’s perceived as a strong play on consumption, maintaining robust business momentum.

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