Credit Suisse lines up its top picks as India’s growth trend looks ‘resilient’

India’s inflation is well-controlled and its growth trends may remain resilient, despite global macro challenges, believes foreign brokerage firm Credit Suisse.

India’s outperformance in 2022 was sustainability of credit growth, equity inflows and solid corporate earnings momentum. These will be key factors to watch out for, the firm said.

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“We expect domestic demand to remain resilient, led by a pick-up in government spending and private capital expenditure, a recovery in real estate and government initiatives (like Production Linked Incentive Schemes) to boost the manufacturing sector,” wrote Credit Suisse Equity Research analyst Premal Kamdar.

Loan growth has accelerated further to around 17 percent in FY23 so far, compared to 13 percent in FY22. This is a sharp uptick from a multi-year low of 5 percent in FY20, the firm noted. “We expect corporate loan growth to remain healthy, given a rise in industry capacity utilisation and a recovery in the capex cycle,” said Kamdar.

The Nifty’s corporate earnings are projected to grow by 15 percent and 13 percent during FY24 and FY25, based on Bloomberg consensus. Credit Suisse does not expect any material cuts in this as cost pressures are now abating.

On the back of these factors, along with sustained domestic equity inflows, India’s valuation premium is justified. “While India’s valuation remains above the 10-year average, we believe this is justified, given the country’s macroeconomic stability and relatively resilient growth outlook,” Kamdar said.

Top buys in large-caps: Godrej Consumer Products, Havells India, Hindustan Aeronautics, Hindustan Unilever, ICICI Bank, IndusInd Bank, Infosys, Mahindra & Mahindra, Marico and SBI

Top buys in mid-caps: Asahi India, Crompton Consumer Electricals, Dixon Technologies, JB Chemicals & Pharma, PI Industries, PVR, Sunteck Realty, Vinati Organics

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