Top banking, IT stocks to buy: Five stocks that may beat COVID-19 blues and gain up to 16%

Investors should be judicious in their stock selection from here on and should focus on companies with high-quality business franchises

Indian share market outperformed the global markets for the second consecutive month in July with Nifty rallying up to 7.5 per cent, as compared to a 2.4 per cent rise in the Dow Jones Industrial Average. Market sentiments were also buoyed by better-than-expected quarterly numbers, especially by the IT companies, along with the foreign inflows. The Indian economy has picked up significantly from April, analysts believe that it will carry forward the positive momentum for the next few months but slowdown might be witnessed post festive season. “We remain positive on the markets from a longer-term perspective. We feel that investors should be judicious in their stock selection from here on and should focus on companies with high-quality business franchises which have strong revenue visibility going forward,” said analysts at Angel Broking.

The research and brokerage firm Angel Broking has listed out a few banking and IT stocks which have the potential to rise further from the current levels. The list includes Larsen and Toubro Infotech, Persistent Systems, Zensar Technologies from IT space while HDFC and ICICI Bank from the banking sector.

Larsen & Toubro Infotech: L&T Infotech is one of the fastest-growing mid-cap IT companies. The company doesn’t have a very large exposure to service-oriented verticals like travel and tourism which are amongst the worst impacted due to the COVID-19 outbreak. “LTI has been growing significantly faster than both mid and large-cap peers have over the past few years on the back of strong deal wins and we expect the outperformance to continue for the company,” the brokerage firm added with a price of Rs 2,838, an upside of nearly 15 per cent.

Persistent Systems: The brokerage firm sees over 12 per cent rise in the stock price, given the negligible impact of Covid-19 on FY21 numbers, strong deal wins, the ramp-up of existing projects along with margin expansion. The company has a very strong presence in Hi-tech, manufacturing and life science segments which were amongst the least impacted sectors due to Covid-19. Company has won a large deal during the quarter which will ramp up over the next few quarters. “The new management focus on annuity deals are expected to lead to stable growth going forward,” Angel Broking said in a report.

Zensar Technologies: The company has won deals worth $150 million during the quarter and management said that the deal pipeline is very strong at $1.5 billion as compared to $1 billion a quarter ago. It will take Zensar Technologies to jump 16 per cent to touch the target price of Rs 204 pegged by the brokerage firm.

HDFC: The brokerage firm sees a 16 per cent upside in Housing Development Finance Corporation share price. It believes that HDFC has sufficient capital (Tier-1 -16.2%) and Liquidity (Rs.30,000cr) to tide over this situation. “HDFC’s superior know-how of the segment; strict underwriting practices and buffer provision would help it to better manage the credit loss,” the brokerage said in a report. The firm has predicted a price target of 2,075 apiece.

ICICI Bank: Strong liability franchise, healthy asset mix and over 70 per cent provision for bad assets make the brokerage firm bullish on this stock with an upside of 14 per cent. “ICICI Bank is trading at a significant discount to historical average valuations and offers favourable risk-reward from current levels,” said Angel Broking in a report. The brokerage has given a target price of Rs 410 apiece.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)