September 5, 2024 — The Indian stock market has experienced notable gains this year, driven by strong domestic economic growth, a surge in retail investors, stable policies, easing inflation, and expectations of forthcoming rate cuts in both the US and India. The benchmark indices, Nifty 50 and Sensex, have risen by 16% and 14%, respectively, year-to-date as of September 4. With anticipated rate cuts potentially acting as a catalyst for further gains, the market outlook remains optimistic.
However, experts warn that elevated market valuations could restrain further growth. Additionally, geopolitical tensions and the upcoming US Presidential Election are expected to influence market dynamics. Despite these uncertainties, several stocks are identified as having strong potential for solid returns over the next year. Pankaj Pandey, head of research at ICICI Securities, recommends the following five stocks for long-term investment:
Sonata Software
Previous Close: ₹668.50
Target Price: ₹770
Upside Potential: 15%
Pandey highlights Sonata Software’s strong long-term growth prospects, anticipating significant momentum starting from the second half of FY25. The company’s target is $1.5 billion in revenue by FY27, driven by a robust IT services pipeline and advancements in GenAI. Despite current margin pressures and pipeline delays, Sonata is expected to see a recovery in margins and continued growth in IT services.
Piramal Pharma
Previous Close: ₹213.03
Target Price: ₹230
Upside Potential: 8%
Piramal Pharma is focusing on Contract Development and Manufacturing Organizations (CDMO) services. Pandey points to global trends and improvements in funding scenarios, alongside a strong global manufacturing network, as key growth drivers. The company’s efforts in complex generics and consumer healthcare are expected to further enhance its market position.
PCBL
Previous Close: ₹510.20
Target Price: ₹600
Upside Potential: 18%
PCBL, a leading carbon black manufacturer, benefits from high-margin specialty products and a capital-efficient business model. Pandey anticipates continued growth in carbon black volumes, driven by export opportunities and new market penetration, along with potential in Nano Silica.
Kalpataru Projects International
Previous Close: ₹1,400.05
Target Price: ₹1,630
Upside Potential: 16%
Kalpataru Projects boasts a strong order backlog and is expected to see robust revenue growth. The company is winning orders at double-digit margins, which should positively impact profitability in H2FY25. Pandey expects significant improvements in return on equity as a result of strategic asset divestments and operational efficiency.
Star Health and Allied Insurance Company
Previous Close: ₹630.25
Target Price: ₹730
Upside Potential: 16%
Star Health, the largest standalone health insurer in India, is positioned well with its market share and distribution network. Anticipated regulatory changes and reduced GST on insurance products are expected to enhance growth prospects. Pandey foresees a significant increase in gross written premiums, supported by expanded agency networks and strategic focus on SMEs and MSMEs.
These recommendations reflect Pandey’s belief in these companies’ potential for strong long-term performance despite current market challenges.
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