Diwali Nifty stock picks: 5 stocks to beat volatility, outperform market in Samvat 2077

Samvat 2076 has been more than a Black Swan event, on the back of COVID-19 pandemic which affected the world economy and took an incalculable human and health toll. The pandemic spooked the equity market which led to heightened volatility during Samvat 2076, turning out to be a difficult year for the investors. Research and brokerage firm Sharekhan has come up with five Nifty Diwali stock picks for Samvat 2077, which is a mix of both large-cap and quality mid-cap stocks.

Since its Diwali picks report of 2019, the Nifty 50 index has gained 2.9 per cent on the back of severe ups and downs owing to COVID-19. While its Diwali stock basket has delivered a 6.6 per cent return. “The threat of the pandemic is not over yet and the fear of the second wave in big geographies is a potential risk. Further, the overhang of the US election outcome will keep the equity market on its toes,” Sharekhan said in its report.

For Samvat 2077, the brokerage firm has selected 12 quality stocks to create a portfolio, which is a mix of both large-caps and quality mid-caps. According to the brokerage firm, all the 12 companies in the portfolio have all the ingredients to outperform the broader market indices over the next 12 months and at the same time withstand volatility and emerge stronger. Given below are 5 Nifty 50 stocks from that basket:

Diwali Picks 2020 (Samvat 2077)

Asian Paints: Asian Paints is a market leader in the decorative paints segment with a 55 per cent market share.The brokerage firm says that consumer shifting to trusted brand in post-pandemic era; rapid urbanisation, sustained innovation with high quality products and uptick in rural demand will help Asian paints to deliver consistent volume growth of high single digit to low double digit in the near term.

Bharti Airtel: The telecom giant has strong digital capabilities and robust network coverage. Sharekhan believes Bharti Airtel is well-positioned given a favourable market structure (moving towards a two-player market) and continued weakness in Vodafone Idea (losing market share). Bharti is expected to hugely benefit from consolidation in the sector, given increasing ARPU and a low smartphone mix.

Kotak Mahindra Bank: The bank has been able to consistently grow and gain market share in advances as well as its deposits in the last 5 years. The brokerage firm noted that the bank’s strong operating metrics, prudent and agile leadership team, well capitalized balance sheet, as well as the quality of its subsidiaries (formidable players in own segments) provide long-term value. However, a prolonged lockdown and consequent rise in NPAs can pose risks to profitability.

Larsen & Toubro: Sharekhan in its report highlighted that L&T remains at the forefront to reap benefits from the recently-announced Atma Nirbhar Bharat scheme from the government with its diversified businesses across sectors like defence, infrastructure (roads, railways, metros, DRC), heavy engineering, IT. The key risks include slowdown in domestic macro-economic environment or weakness in international capital investment which can affect business outlook and earnings growth.

Tech Mahindra: The IT company is well-placed to capitalise opportunities from three mega-trends i.e 5G, connected devices and telecom-media convergence, given its early investments in network capabilities, investments in IPs, platforms and partnerships to develop an ecosystem play, says Sharekhan. It prefers Tech Mahindra on the back of anticipated improvement in growth in the enterprise segment, 5G opportunity and scope for a rise in margins.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)