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10 Stocks To Invest For The Long Term

April 11, 2023 10:24 IST

The third-quarter financials didn't excite market watchers.
But equity investors can still make money if they invest in the right stocks.

Illustration: Uttam Ghosh/Rediff.com

The corporate earnings for the quarter ending December 31, 2022 (Q3FY23) were lower than expected, with a year-on-year (YoY) decline in net profit of non-financial firms (those excluding banks, non-banking finance companies and insurance firms).

This triggered an earnings per share (EPS) downgrade by brokerages after nearly one and half years of earnings upgrade.

EPS refers to how much net profit a company makes for every share owned by its owners and shareholders.

For example, brokerages now expect 26 of the fifty Nifty50 index companies to report lower EPS in FY23 compared to their estimates prior to Q3FY23 results.

In comparison, the rest of the 24 Nifty50 companies are expected to report higher EPS in FY23 compared to previous estimates.

The downgrade/upgrade ratio, is even worse for the Nifty Junior index companies.

This index tracks share price of 50 large-cap companies that are not part of the Nifty50 index.

Brokerages expect nearly 70 per cent, or 34 of the 50, Nifty Junior index companies to now report lower EPS in FY23 than what they had expected at the end of calendar year 2022 (CY22) on December 31.

 

The biggest downgrade has been for companies in sectors such as metal & mining, oil & gas, life insurance, paint, FMCG, pharma & healthcare, and consumer durables.

In contrast, most of the earnings upgrade has been for banks, auto makers, power and some FMCG companies.

Within the Nifty50 index, the biggest earnings downgrade is seen in Bharat Petroleum Corporation, Tata Steel, and JSW Steel, ranging between 39 and 61 per cent.

For Nifty Junior companies, the biggest downgrade is for Indian Oil Corporation, Indus Towers, and Bandhan Bank.

The downgrade in earnings also led to a cut in the price target for most of the index companies and has been instrumental in a decline in the indices from their 52-week highs reached in December 2022.

Equity investors, however, can still expect to make money if they invest in the right stocks.

Quite a few index and leading non-index stocks are expected to report good earnings in Q4FY23, thanks to their better financial performance in Q3 of FY23.

Thus brokerages have upgraded their EPS for FY23 and have also raised their share price target.

Here is a select list of 10 stocks from Nifty 50 and Nifty Junior indices that have seen the biggest upgrades in their FY23 EPS estimates by brokerages since the end of December 2022, according to the data sourced from Bloomberg.

In fact, all of them have also seen an increase in their FY24 EPS estimates during this period.

In the analysis, companies such as Tata Motors and Interglobe Aviation, which are expected to remain loss-making in FY23 despite an earnings upgrade, have been excluded. 

LIC

Mahindra & Mahindra

Info Edge (India)

Hindustan Aeronautics

Dr. Reddy's Laboratories

State Bank of India

Axis Bank

Britannia Industries

Bajaj Finserv

PI Industries

Feature Presentation: Rajesh Alva/Rediff.com


Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.

Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.

Krishna Kant & Ram Prasad Sahu
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