HDFC Securities Stock Picks: Top 10 Stocks for Diwali 2024

Diwali Stock Picks 2024: The Indian stock market has witnessed an extraordinary rally in the last four and a half years, particularly since the pandemic lows of March 2020. With corporate earnings growth of 24 per cent in the Nifty-50 stocks of the year FY21 to FY24, and an increase in retail investor participation through systematic investment plans (SIPs), mutual funds and insurance companies, stocks have seen a re-rating, generating stellar returns. However, at current high valuations, many stocks across all sectors offer a limited margin of safety and global developments could trigger major market corrections. Amid this environment, HDFC Securities has selected a balanced portfolio of 10 stocks for Diwali 2024, aiming for moderate returns with limited downside risk.

Market Overview: Mixed Feelings Amid Global Uncertainty

Since the pandemic-induced lows, Indian stock indices have not seen a significant correction, supported by strong earnings growth and commitment from retail investors. However, overall risk factors remain high. The 2024 US presidential election is one such factor, with potential changes to economic, fiscal or trade policies that could impact global markets. While recent rate cuts by the US Federal Reserve have reduced borrowing costs, policy divergence between major central banks and geopolitical risks such as the Middle East conflict could increase volatility in financial markets.

China’s recent fiscal and monetary stimulus has attracted flows that may challenge India’s position in the near term. However, India’s strong long-term growth narrative, driven by its demographic dividend, digital adoption and business ecosystem, continues to offer a compelling opportunity for global investors. With its increasing weight in global indices and foreign portfolio investments (FPI) showing signs of strengthening amid a weakening US dollar, India remains an attractive investment destination.

HDFC Securities Stock Picks

HDFC Securities has created a portfolio of 10 stocks, combining well-established mega caps with mid and small caps. These stocks are chosen to offer superior upside potential while mitigating downside risk.

Bank of India (BOI)

• Sector: Public Sector Banks
• Target Price: Rs 132 (Current: Rs 105)

Perspective: BOI is India’s sixth largest public sector bank, and its performance in Q1FY25 shows a strong 12 per cent year-on-year increase in total business. The bank’s focus on retail, agricultural and MSME (RAM) lending has driven impressive growth, with retail advances increasing 20 per cent year-on-year. The bank is trading at an attractive valuation with a price-to-book ratio of 0.6 times for FY26. HDFC Securities recommends a buy in the range of Rs 96-106, expecting a 25 per cent rise by next Diwali .

JK Lakshmi Cement Ltd

• Sector: Cement – North India
• Target Price: Rs 936 (Current: Rs 811)

Perspective: JK Lakshmi Cement has a strong presence in North, West and East India. The company has been expanding its capacity, currently at 16.4 MTPA, with plans to increase it to 24 MTPA by FY27. Despite a soft pricing environment, improvements in the company’s operational efficiency and its focus on Renewable energy (39 percent of total energy use) offers a promising outlook. HDFC Securities suggests buying between Rs 738 and Rs 819 for a potential profit of 15 per cent.

Jyothy Laboratories Ltd

• Sector: Personal Care – Large Consumer
• Target Price: Rs 600 (Current: Rs 528)

Perspective: Jyothy Labs, known for its flagship brand ‘Ujala’, has shown consistent growth, especially in its fabric care segment, which has a market share of 83 per cent in the bleach category. The personal care segment, with brands such as Margo, has also shown solid growth, contributing to the company’s premiumization strategy. With a buy recommendation of Rs 480-533, the stock could earn a moderate return of 14 per cent.

L&T Finance Ltda

• Sector: Financial Services
• Target Price: Rs 219 (Current: Rs 168)

Perspective: L&T Finance has demonstrated resilience in the financial services sector, focusing on strengthening its investment and lending portfolios. With an attractive price band of Rs 153 to Rs 170, the stock could generate returns of up to 30 per cent over the next year.

National Aluminum Company Ltd (NALCO)

• Sector: Aluminum
• Target Price: Rs 270 (Current: Rs 218)

Perspective: NALCO has a dominant position in the aluminum industry and with global demand for metals increasing, the company is well poised for growth. HDFC recommends a buy at Rs 198-220, expecting a 24 per cent rise.

Navin Fluor International Ltd

• Sector: Chemicals
• Target Price: Rs 3,948 (Current: Rs 3,362)

Perspective: Navin Fluorine is a leader in the inorganic chemicals segment and benefits from strong demand in pharmaceutical and agrochemical products. The company is poised for significant growth and HDFC suggests buying in the range of Rs 3,059-3,396.

NCC Ltd.

• Sector: Construction – Civil/Turnkey
• Target Price: Rs 363 (Current: Rs 300)

Perspective: NCC is one of the leading players in the Indian construction sector, with a strong order book and growing revenue. With a price target of Rs 363, the stock offers an upside of 20 per cent.

PNB Housing Financing Ltd

• Sector: Housing Financing
• Target Price: Rs 1,160 (Current: Rs 981)

Perspective: PNB Housing is well positioned to benefit from India’s growing real estate demand, particularly in affordable housing. The stock could appreciate 18 percent over the next year.

Reliance Industries Ltd.

• Sector: Refineries
• Target Price: Rs 3,243 (Current: Rs 2,689)

Perspective: Reliance Industries continues to be the market leader, with its portfolio diversified across oil refining, telecom and retail. The stock offers a strong upside of 20 per cent with a buy recommendation in the range of Rs 2,447-2,716.

State Bank of India ( SBI )

• Sector: Public Sector Banks
• Target Price: Rs 960 (Current: Rs 805)

Perspective: SBI India’s largest public sector bank, continues to show strong fundamentals with improved asset quality and a strong loan portfolio. HDFC Securities expects a 19 per cent upside with a target price of Rs 960.

(Disclaimer: This article is based on a research report by HDFC Securities. Investors are advised to conduct their own research and consult experts before making any investment decision.)

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