Unsurprisingly, the list is dominated by capex plays as the impact of the upcycle is being noticed in both earnings as well as share prices.
Topping the chart are two rail stocks – Titagarh Rail Systems and Jupiter Wagons – which have been reporting at least a 100% YoY jump in their profits. In the September quarter, Titagarh reported a 107% rise in PAT and 54% sales growth while Jupiter saw its profit rising 233% against 111% growth in sales.
While Titagarh shares have rallied 476% in the last one year, Jupiter Wagons stock has seen a 320% rise.
Titagarh, which makes railway wagons, recently announced a strategic partnership with ABB to supply propulsion systems for metro rolling stock projects for Gujarat.
Lloyds Engineering, which reported a 149% YoY jump in Q2 profit, is third on the list with 282.5% growth in share prices in just 1 year.
Similarly, the stocks of Apar Industries, Anand Rathi Wealth and Kaynes Technology have grown over 200% in one year.”Demand for premium conductors continues to remain strong in the domestic market from TBCB and re-conducting space. During Q2FY24, improved re-conducting execution capabilities resulted in higher productivity. The cable business is likely to continue with its growth momentum, driven by strong growth in elastomeric cables,” domestic broking Prabhudas Lilladher said.
Others on the list include Tilaknagar Industries, Action Construction Equipment, Anant Raj, PG Electroplast, The Jammu & Kashmir Bank, RateGain Travel, Elecon Engineering and KPIT Technologies.
What should investors do?
Although earnings are the biggest trigger, stock prices are also influenced by a number of other factors as well including market sentiments, industry trends, growth expectations and future potential.
“We continue to choose our stocks on three defensive principles: sectors that have already sold off or underperformed markets; traditional defensives; and stocks with a positive major event coming up,” foreign broking firm CLSA said in a note to clients this week while recommending holding largecap liquid stocks, which provide increased capital protection and opportunities to achieve growth.
A comparison of Q2 earnings of small and midcaps and largecaps shows that profit growth in smaller companies outscored that of largecap peers in auto, durables and FMCG despite a much slower topline owing to tailwinds from lower input prices.
“Even in BFSI, especially PSU banks and NBFCs SMID earnings are far outpacing largecap peers owing to lower credit costs. IT, metals and pharma are the sectors wherein SMID is outpacing large caps even on the demand front,” Nuvama said.
CLSA analyst Vikash Kumar Jain notes a divergent move in small- and big-cap banks which has taken the valuation premium of SMID banks to big banks to 8-10-year highs.
“FII and DMF overweight of banks is also near record lows, while our growth and valuation analysis finds banks as most attractive within the Nifty,” he said. Banks remain the biggest overweight in CLSA’s India-focus portfolio.
The brokerage’s top picks include Axis Bank, Bharti Airtel, Hindustan Unilever, ICICI Bank, Mahindra & Mahindra, NTPC, Sun Pharma, UltraTech, TCS and SBI.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)