The global investment bank prefers companies that present long-term growth prospects and business models that can sustain high return on equity
Global brokerage firm, Nomura has raised its June 2019 target for the Nifty to 11,892, based on a roll-forward on 16 times estimated earnings for FY20.
In the backdrop of challenging and uncertain macroeconomic factors, Nomura has constructed a portfolio using a bottom-up approach.
The global investment bank prefers companies that present long-term growth prospects and business models that can sustain high return on equity.
The strong run-up in many such stocks on a year-to-date basis has led to stretched valuations that imply an expectation of very high growth, leaving little scope for a slip.
Given high valuations, Nomura remains underweight on consumer staples. It is overweight on auto stocks and select retail bank stocks and NBFCs.
Nomura has also selected a few potential turnaround prospects in its model portfolio, where expectations are low and valuations are comforting. It is overweight on healthcare and select corporate banks.
The 30 stocks in Nomura's model portfolio include Maruti Suzuki India, M&M, Hero MotoCorp, Crompton Greaves, Cummins India, Shree Cements, ITC, Dabur India, Asian Paints, HDFC Bank, IndusInd Bank, SBI, L&T, HCL Technologies, Tech Mahindra, and JustDial, among others.
