16 stocks Goldman Sachs suggests buying amid recent sharp declines and better valuations
As the global brokerage remains bullish on Indian stocks and sees it unchanged from global maturity, it advises its investors to focus on quality growth, earnings visibility, targeted alpha themes. In its latest EM Equity Strategy report dated November 18, the global brokerage said quality factors have been more effective in previous periods of declining growth.
We highlight 4 quality flavors that add to the report:
– Strong balance,
– Visibility of high income,
– Good EPS update,
– and (4) Low beta stocks.
The brokerage stressed that valuations are down 8 percent after the latest pullback, but still trade at around 23x fwd. MSCI India’s PE, which is 1.4 sd above its 10-year average and above the brokerage’s ‘fair value’ estimate of 21x, suggests more downside risk. History suggests a muted return is imminent if initial valuations are high and earnings see a decline.
Overall, the brokerage remains market-weighted in India within its Asia/EM 2025 allocations. Sector-wise, it remains overweight (OW) on select domestic sectors with high tangible returns such as autos, telcos, insurance, realty, and internet.
Also, improved global exporters like Infotech to OW and Pharma to MW on stable/improving demand, EPS tails from weak INR and defensive factors.
So, as momentum looks fragile amid the forecast for the bluechip Nifty index, the brokerage suggests buying 16 stocks that are down 20 percent from their latest 3-month highs and command reasonable valuations relative to their history. average.
Stocks listed are Trent, Indigo, Shriram Finance, Havells India, Cholamandalam Investment, IndusInd Bank, Aurobindo Pharma, AU Small Finance Bank, Phoenix Mills, L&T Finance, Emami, Star Health and Allied Insurance, Crompton Greaves, Kajaria Ceramics, Information on -CE and CreditAccess Grameen. The drag on the stock is up as much as 30 percent from the high of 3 months ago.
