Trading the 2024 Indian Lok Sabha Elections: Indian stock markets have been fluctuating in a narrow range recently, reflecting investor anxiety ahead of the outcome of the 2024 Indian Lok Sabha elections scheduled for June 4. Market volatility has increased significantly in recent weeks, as evidenced by the India VIX, the country’s fear index, surging by more than 80% in May alone.
Related Article:Is the Indian stock market fairly priced or overvalued? Experts give their opinion
Experts expect the volatility to subside only after the election results are in. Until then, the markets may continue to struggle to find a decisive direction.
Amidst the election uncertainty, experts remain optimistic about the medium to long term prospects of the Indian equity market. They believe there are a lot of opportunities across sectors and hence one should buy stocks on the dip.
They recommend buying quality stocks with sound fundamentals at this time.
Also read: Stocks to buy: Infosys, Adani Ports among 10 stocks that can rise 8-16% in next 3-4 weeks, say analysts Are you holding?
Kripashankar MauryaVice President of Research Select Brokerrecommends the following seven stocks to buy within the next one to three months: He expects these stocks to deliver healthy double-digit gains in the near term: Take a look.
DCX Systems | LTP: ₹323.15 | Target Price: ₹470 | Upside potential: 45%
DCX has entered into a joint venture (JV) with ELTA to increase profitability.
The joint venture will specialise in railway products and is expected to commence production in FY25 in the product development category, which offers significantly higher profit margins than the build-to-print (BTP) category.
Backward integration with Raneal Advanced Systems for PCB assembly will add approximately 100-150 basis points to margins.
The company is also exploring opportunities for further expansion in the domestic defense sector.
“DCX’s revenue, EBITDA and PAT are expected to grow at compound annual growth rates (CAGR) of 19%, 31% and 32% respectively from FY23 to FY26, driven by ELTA JV, backward integration, exports and new orders in domestic defence market. The target price is ₹“Based on a 30x (PE) multiple on FY26 estimated EPS (earnings per share), it works out at $470,” Maurya said.
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Fiem Industries | LTP: ₹1,230.30 | Target Price: ₹1,569 | Upside potential: 28%
The stock is being driven by continued dominance in the E-2W lighting segment, healthy free cash flow generation, new customer additions, diversification into the PV segment (winning new orders from EU and domestic OEMs), and partnership with Gogoro.
“We expect Fiem to grow above the industry next year, driven by product diversification and capacity expansion. We have rolled our valuation forward to FY26 and raised our target price to ₹1,569 (18 times FY26 projected EPS),” Maurya said.
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Coforge | LTP: ₹5,263.60 | Target Price: ₹6,007 | Upside potential: 14%
Coforge is investing heavily in its sales and marketing capabilities to ensure continued, robust growth over the next few years. It expects SG&A expenses to be close to 15%.
With a 17.3% increase in the actionable backlog, management is confident of delivering strong organic growth in FY25. Growth is expected to be broad-based, driven by a recovery in travel.
Opportunities remain strong for GenAI and Advanced Analytics, and management is confident that the company will achieve robust organic growth in FY25, driven by higher order intake in Q4 and acquisition synergies.
“The target price has been revised, ₹6,007, which implies a price-earnings ratio of 29 times FY26 forecast EPS. ₹207,” Maurya said.
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Scientist Long-term: ₹1,808.20 | Target Price: ₹2,060 | Upside potential: 14%
The management team plans to focus on further strengthening investments for growth.
The company expects DET EBIT margins in FY2025 to be 16-18%, similar to FY24.
Management expects FY25 forecast DET revenues to grow in the high single digits year-over-year despite weak macroeconomic conditions.
The company will continue to focus on efficiency measures, invest in growth and enhance its current offering platform across a balanced portfolio of selected industries.
“The target price has been revised, ₹2,060, which implies a P/E ratio of 22 times (adjusted) FY26 forecast EPS. ₹94,” Maurya said.
Global Health (Medanta) | LTP: ₹1,223.20 | Target Price: ₹1,457 | Upside potential: 19%
Ongoing expansion plans, delays in final approvals for new facilities and a lack of plans for tariff increases next year will continue to impact margin profile over the next few years.
“We expect Medanta’s revenue, EBITDA and ARPOB (average revenue per occupied bed) to grow at a CAGR of 20.9%, 23.5% and 27.5% respectively in forecast FY2024-26 compared to CAGRs of 36.5%, 76.3% and 236.4% respectively in FY2021-23,” Maurya said.
“We are in a capital expenditure cycle and we are planning to make investments. ₹Profits are expected to grow by Rs 1,000-1,200 crore over the next two years, with margins coming under some pressure in FY2025-27 when the Noida plant begins operations.Taking all the above parameters into consideration, we have valued the stock at an EV/EBITDA multiple of 31x for FY2026 and calculated the target price as follows: ₹1,457 per share,” Maurya said.
Dr. Reddy’s Laboratories | LTP: ₹5,872.70 | Target Price: ₹7,157 | Upside potential: 22%
Dr Reddy’s growth story is based on growth in its underlying business and new product launches across geographies.
The company will leverage developments in the United States and Europe in emerging markets to build its portfolio and license innovative assets from innovative companies.
Growth will be driven by the company’s internal R&D pipeline, consumer health (joint venture with Nestle), biosimilars business and digital health.
“We expect Dr Reddy’s revenue, EBITDA and PAT to grow at CAGR of 13%, 17.4% and 16.6% respectively during FY23-26. We value the company’s shares on FY26 EPS and have set our target price at ₹7,157 (17 times FY26 projected EPS),” Maurya said.
Birla Corporation | LTP: ₹1,426.85 | Target Price: ₹1,745 | Upside potential: 22%
The general elections and severe summer weather across the country are expected to impact cement demand in Q1FY25.
Traditionally, the second quarter sees a drop in demand due to the monsoon season.
The company plans to continue ramping up operations at its Muktvan facility, specifically targeting the Maharashtra market to avail tax benefits.
Our focus remains on expanding our market share for premium products in Maharashtra, Gujarat and Rajasthan, states which have ample growth potential.
Additionally, management has indicated it aims to increase EBITDA/t by 8-10% in FY25.
“We expect revenue and EBITDA to grow at compound annual growth rates of 11.5% and 15%, respectively, from FY24 to FY26. Our target EV/EBITDA multiple is 9x FY26 EBITDA. Hence, our target price is ₹“1,745,” Maurya said.
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