Amidst a significant sell-off in Indian equities, JM Financial has identified 39 stocks to consider for purchase, including ONGC, Havells India, DLF, Lemon Tree, and BHEL. This recommendation comes as Foreign Institutional Investors (FIIs) have been withdrawing substantial amounts from the market, primarily due to attractive valuations in China and disappointing earnings reports from Indian companies.
FII Outflows: A Major Concern for Indian Markets
In October 2024, FIIs pulled out a staggering โน1.16 lakh crore (approximately $14 billion) from Indian equities, marking the highest monthly outflow on record. This trend has continued into November, with further sell-offs leading to a nearly 11% decline in the Nifty50 index from its peak. The primary drivers of this exodus include:
- High Valuations: The Indian market has been trading at elevated price-to-earnings (P/E) ratios compared to historical averages, prompting investors to seek better opportunities elsewhere.
- Chinese Stimulus Measures: Recent economic stimulus packages announced by the Chinese government have made Chinese stocks more appealing to foreign investors, who are shifting their focus away from India.
- Weak Earnings Reports: Many Indian companies have reported disappointing second-quarter earnings, leading to a reassessment of growth prospects and valuations.
Stocks to Watch: JM Financial’s Recommendations
Despite the prevailing market challenges, JM Financial remains optimistic about certain stocks that have seen significant corrections. The brokerage highlights a mix of large-cap, mid-cap, and small-cap stocks that investors might consider:
Large-Cap Stocks
- ONGC
- Havells India
- DLF
- Reliance Industries
- Maruti Suzuki
- Cholamandalam Investment
- Samvardhana Motherson
- Shriram Transport
- Polycab
- Jindal Steel & Power
- Bank of Baroda
- Hindalco
- Bharat Electronics
- Axis Bank
Mid-Cap Stocks
- BHEL
- Oil India
- Suzlon Energy
- Supreme Industries
- Global Health
- Gujarat Gas
- KEI
- Metro Brands
- Deepak Nitrite
- Marico
Small-Cap Stocks
- Lemon Tree Hotels
- Zee Entertainment
- H.G. Infra Engineering
- Ahluwalia Contracts
- Cyient DLM
- Gokaldas Exports
- Star Health and Allied Insurance
- SAMHI Hotels
- PNB Housing Finance
- CMS Info Systems
- Balrampur Chini Mills
- Bikaji Foods
- Techno Electric
- Aadhar Housing Finance
These stocks have corrected significantly from their 52-week highs and may provide attractive entry points for long-term investors.
Market Outlook: Potential for Recovery
Analysts at JM Financial believe that government capital expenditure and rural demand are likely to pick up in the second half of FY25. They emphasize that consistent domestic institutional investor (DII) support through systematic investment plans (SIPs) could help stabilize the market amid ongoing FII outflows.Furthermore, despite the current volatility, Indiaโs structural growth story remains robust. Key factors supporting this outlook include:
- Rapid Economic Growth: India is poised to be one of the fastest-growing economies globally.
- Increasing Domestic Investment: Gross Fixed Capital Formation (GFCF) as a percentage of GDP has been on the rise.
- Demographic Advantage: Indiaโs youthful population is expected to drive consumption and economic activity.
- Strong Domestic Flows: Continued SIP inflows indicate robust domestic investor confidence.
Conclusion: Navigating Market Challenges
While the current environment presents challenges due to FII outflows and high valuations, strategic investments in selected stocks could yield favorable returns as the market stabilizes. Investors are advised to conduct thorough research and consider both domestic and global factors influencing market dynamics.
Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Please consult with a financial advisor before making any investment decisions.
