Top large, mid and smallcap stocks to buy: Here are Emkay's picks

05 Sep , 2021 By : Kanchan Joshi

Brokerage firm Emkay Global's sector and stock selection is based on themes of capex revival (infrastructure, corporate capex and residential real estate), pick-up in discretionary consumption (pent-up demand post unlocking, festive season), rural resilience, global growth and exports.

The brokerage in a recent note said that it is meaningfully overweight on banks and autos/ancilliaries sectors, and is significantly underweight on consumer goods sector due to expensive valuations.

Under Emkay's high conviction list, it is overweight on largecaps like BPCL, ICICI Bank, Infosys, SBI, Shree Cement and Tata Motors and has ‘Buy’ ratings on the mentioned stocks. Whereas, it has a Sell rating on PNB as asset quality continues to disappoint among peers, while the stress pool remains elevated, making the brokerage wary amid Covid-19-induced disruption.

Its small and midcap Buy ratings include Ashok Leyland, Bharat Forge, Birlasoft, Radico Khaitan and Westlife Development.

Its overweight stance on banks is based on credit growth revival, likely normalization in asset quality post Q2FY22 and comfort on valuations. It is overweight on State Bank of India (SBI), Axis Bank, and Kotak Mahindra Bank whereas it has an equalweight stance on private lenders HDFC Bank and ICICI Bank. The brokerage has also added Equitas SFB to its SMID (small and mid-cap) portfolio.

For autos, it expects strong demand revival even as the sector is buffeted by near-term headwinds (chip shortage, commodity inflation, fuel prices). The preference order is commercial vehicles, 2-wheelers, passenger vehicles and tractors.

Emkay is now overweight (OW) on Hero Motocorp and equalweight (EW) on Bajaj Auto, considering the likely demand pick-up (festive season), exports, lower exposure to chip shortages and appetizing valuations. It has cut Eicher Motors stance to EW from OW, given near-term production issues. Highest OW positions are: Tata Motors and Motherson, followed by Maruti. Ashok Leyland, Bharat Forge and Apollo Tyres are its top small and midcap buys.