A pre-election rally is on the cards and Nifty will likely hit 23,400 by June 2024 amid volatility, an ICICI Direct note said as it recommended investors to embrace the dips as a buying opportunity.

In the election year, February-March bottom will offer fresh entry opportunities to ride the next leg of up move in the run-up to the general election, garnering minimum returns of 14%, ICICI Direct said placing strong support 20,500-20,800.

Benchmark indices have performed well in election years going by four decades of history and despite spikes in volatility, the median returns in election years have been 17%.

As per ICICI Direct, the outperformance of PSU banks will only amplify and investors should also raise their exposure to IT stocks ignoring the noise.

The decade-long breakout signifies a structural turnaround in PSU banks. With Nifty PSU Banks versus Nifty ratio turning up post breakout above the long-term trend line, relative outperformance in coming quarters is envisaged by this brokerage.

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Its top picks include the State Bank of India (SBI), Bank of Baroda (BoB), Punjab National Bank (PNB), LIC Housing Finance, Union Bank and PNB Housing Finance. Among the private BFSI plays, L&T Finance and Axis Bank find a mention in the note.

Tata Consultancy Services (TCS), Infosys, HCL Technologies, Eclerx Services, and Coforge are top stocks in the IT space for ICICI Direct.

In the capital goods space, the uptrend is intact, the brokerage note said. The preferred picks are Larsen & Toubro (L&T), ABB, Thermax, Ador Welding, Kalpataru Power, JSW Energy, Grindwell Norton, KEC International, and Tega Industries.

PSU theme which has been a flavour of the markets over the past 12 months could outperform for the extended period unveiling several money-making opportunities exist, the note said. It attributed turnaround backed by improving fundamentals to be the reason for the positive outlook. Hindustan Aeronautics (HAL), Bharat Electronics (BEL), Steel Authority of India (SAIL), Coal India, Bank of India, NTPC, Engineers India, NMDC, Midhani, RCF, National Aluminium and Concor are stocks with promise according to the brokerage firm.

Meanwhile, the peaking of the dollar will likely serve as a boon for metal stocks like Tata Steel and Hindalco Industries.

— Oil & Gas/Energy: Reliance Industries, ONGC, GAIL, HPCL, Tata Power, Oil India, Mahanagar Gas (MGL), Engineers India (EIL).

— Auto: Mahindra & Mahindra (M&M), Tata Motors, Ashok Leyland, Apollo Tyres, Mayur Uniquoters, Exide Inds, CIE India, Bosch Ltd, Rico Auto.

— Consumption & Retail: Titan Company, Trent, Havells, Amber, Arvind Fashion, Indian Hotels Company

— Pharma & Chemicals: Sun Pharmaceuticals, Cipla, Ajanta Pharma, Dr Reddy’s Laboratories, Granules, Gufic Bio, Abbott India, Deepak Nitrite, Gujarat Fluorochemicals

— Real Estate: DLF, Arvind Smart, Brigade, Ashiana Housing, Kajaria Ceramics, Century Plywood

— Infra: Ambuja Cement, Birla Corp, Star Cement, JK Cement, PNC Infra, Graphite

— Others: Lemontree, PCBL, Astra Microwave, Adani Port, GPPL, KPR Mills, RCF, IRCON, Texmaco Rail

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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