Diwali Muhurat Stocks: Which Are The Top 10 Stock Picks For This Diwali And Why?

Diwali has been a great time for investment every year and if you are looking to invest in share market Diwali, these are the 10 top stocks you should pick. Read on

The equity markets had a historical journey in Samvat 2076, as it marked a year of enormous volatility, unpredictability, pessimism, divergence, and optimism.

The markets touched an all-time high of 12,431 in Jan '20 and then hit three year low of 7511 in Mar '20 as the COVID-19 pandemic grips the whole world, becoming one of the biggest threats to the worldwide economy.

The unlocking of the economy since Jun '20 has led to a significant recovery in various macro, micro, and high-frequency data points, resulting in equity markets nearing its lifetime high once again.

Nifty is up +4.6% since last Diwali, while Midcaps outperformed Nifty and is up +9.3%. Nifty Smallcap is up +4%.

The significant feature of equity market performance in Samvat 2076 has been the sharp divergences both across and within sectors and companies - highlighting the differentiated impact of COVID on various sectors.

The essentials (Healthcare, Staples) and Technology/Online/E-Commerce businesses were impacted far lesser than the financials, cyclical, and discretionaries.

In fact, for the Healthcare and Technology sectors, the pandemic acted as a tailwind, which can be gauged from their sharp outperformance in Samvat 2076 - Pharma/IT up 51%/44%.

On the contrary, Financials, especially PSU banks, bore the maximum brunt of COVID.

As we enter Samvat 2077, the markets have seen a complete recovery from the Covid lows, in line with improving data points and positive corporate commentary.

More importantly, COVID-19 cases have seen a meaningful decline. Improved corporate earnings have also buoyed the market sentiments.

"We expect Nifty EPS growth of 4% in FY21 while expecting a sharp rebound in FY22. Thus, the overall structure of the market remains positive. At 18x FY22 earnings, Nifty valuations are also not very expensive as it is trading closer to its long-period averages," said Motilal Oswal Securities.

With the economic activity recovering fast, more earnings upgrades cannot be ruled out. Further strong global markets can keep the liquidity abundant in the system, thus providing support to the overall market.

However, intermittent corrections cannot be ruled out as there is a risk of a second wave of Covid-19, and thus, sustenance of economic recovery holds the key.

From the next 12 months' perspective, Motilal Oswal Securities is optimistic about IT, Healthcare, Rural-Agri, Telecom, Consumer, and select Financials. We believe another round of fiscal stimulus could help elevate sentiment further.

 Here is top-10 Diwali Picks for Samvat 2077, according to Motilal Oswal Securities.

Sr No	Name	CMP (Rs)	Target Price  (Rs)	Upside
1.	Bharti Airtel	458	650	42%
2.	State Bank of India	219	300	37%
3.	Hero Motocorp	2,945	3,700	26%
4.	Infosys	1,104	1,355	23%
5.	Ultratech Cement	4,623	5,600	21%
6.	ICICI Bank	438	525	20%
7.	Crompton Consumer	308	360	17%
8.	Dabur India	520	600	15%
9.	PI Industries	2,305	2,611	13%
10.	Divi’s Lab	3,209	3,520	10%

Why one should invest in the above 10 stocks this Diwali?

1. Bharti Airtel: Bharti's execution has been top-notch in the last few quarters, evident from a healthy 16% India Mobile EBITDA growth cumulatively in the previous two quarters. Robust 10m subscriber adds lead to cumulative ARPU improvement of 5%.
2. State Bank of India: Motilal Oswal believe the earnings normalization cycle for SBI has begun, and it remains the best play among the PSU banks, on gradual recovery in the Indian economy, with a healthy PCR of 71%, robust capitalization, a strong liability franchise, and improved core operating profitability.
3. Hero Motocorp: HMCL is poised for faster recovery over other 2W peers due to its rural-focused portfolio and market leadership in the entry and executive segments. Considering its improved competitive positioning post BS6, HMCL should continue to see good demand with its economy-executive focused portfolio.
4. Infosys:  Motilal Oswal expects Infosys to be a key beneficiary in terms of recovery in IT spends in FY22. Infosys remains our top pick within the sector, given its headroom for margin expansion and strong deal wins.
5. Ultratech Cement: The company has a robust pan-India distribution network and preferred supplier status for crucial infrastructure projects. This places it in an excellent position to tap into expected growth in retail and institutional (nontrade) cement demand in India.
6. ICICI Bank: The bank continues to see strong growth in retail deposits and has succeeded in building a robust liability franchise over the past few years, improving. Business trends are improving, with disbursement reaching pre-Covid / higher than pre-COVID levels (in some segments).
7. Crompton Consumer: The Company has further consolidated its position in the fans and pumps market and has become the No.2 player in the Water heaters segment. Despite the vital element of pent-up demand playing out recently, we believe underlying demand is in positive territory, which should sustain/improve.
8. Dabur India: Dabur's investment case is strong, supported by (a) dedicated focus on the Herbal segment, (b) power brand strategy, (c) a spate of new launches, (d) an increasing direct distribution reach, and (e) cost savings which would be plowed back into the business.
9. PI Industries: Motilal Oswal believes PI has levers in place to sustain the growth momentum, led by (a) ramp-up in operations of two multi-purpose plants, (b) revenue from the Isagro acquisition, (c) sustained growth momentum in the CSM business and (d) product launches in the domestic market providing earnings visibility.
10. Divi's Lab: Motilal Oswal is positive on DIVI, given good demand for its APIs, margin enhancement owing to an increase in the in-house manufacturing of intermediates, and additional revenue from new CAPEX.