Mumbai: Utility vehicles maker Mahindra and Mahindra Ltd is currently the most-preferred Sensex stock for analysts as they place their bets on improving demand in the rural sector on the back of a good monsoon.
Of the top five most preferred stocks, three are financials, with ICICI Bank being the second-most preferred stock, and most preferred financial stock despite being in the news for all the wrong reasons, as brokerages welcomed cheaper valuations coupled with steps to investigate alleged wrongdoing.
The analysis includes stocks which have the highest percentage of buys/outperform/add ratings from the Sensex pack of the total ratings for the respective stocks.
According to data from Bloomberg, Mahindra is the most preferred stock with 42, or 97.67% of analysts tracking the stock rating it a buy or outperform, and only one analyst or 2.33% of the total analysts rating the stock a hold or a neutral. There were no sell ratings on the stock.
Mahindra shares that started rallying on 21 February have gained 26.8% since then. Year to date, they are up 19.6% at ₹ 898.30, outperforming BSE’s benchmark 30-share Sensex which rose 4.21% during the period.
“Rural demand outlook remains positive, on expectations of normal monsoons and government spending in rural segment,” Nomura said in a note on 30 May, while maintaining its buy rating and raising its target price to ₹ 1,049 from ₹ 965 earlier.
Nomura analysts pointed that Mahindra maintained its 8-10% tractor growth forecast for fiscal year 2019, with scope for upside risk, and the brokerage estimates 10% growth in fiscal year 2019 and 8% in fiscal year 2020.
“Revival of rural growth and volume recovery in UVs (utility vehicles) should help the stock re-rate, in our view,” Nomura analysts added.
In the case of ICICI Bank, 48 analysts or 92.3% analysts rated the stock a buy or outperform, while three or 5.77% analysts had a hold, or one or 1.92% of total analysts rated it a sell.
“Beyond the remedial measures around the current negative news flow, we maintain our Buy on ICICI Bank given gradual improvement in the operating environment coupled with the arrest of fresh NPL (non-performing loans) formation, and cheaper valuations,” Jefferies India Pvt Ltd said in a note on 18 June. Year to date, ICICI Bank shares have shed 8.28%.
On 18 June, ICICI Bank’s board said that CEO Chanda Kochhar, who is facing conflict-of-interest allegations, will go on leave until a committee investigating allegations of impropriety completes its work. In the interim, Sandeep Bakhshi—who has been appointed as the chief operating officer (COO)—will steer its businesses.
The Videocon group had secured $500 million in loans from a consortium of lenders led by ICICI Bank and 19 other banks in April 2012.
The whistleblower, Arvind Gupta, has alleged that the loans to Videocon group companies were approved by ICICI Bank after the group owner Venugopal Dhoot had invested in NuPower, where Kochhar’s husband Deepak Kochhar was a partner.
While mid-cap IT stocks are in vogue, the same is still not true for their biggest IT companies in the country. Tata Consultancy Services Ltd and Wipro Ltd retained the least preferred stocks position, from a year before.