Bernstein picks India stocks to buy, says one could potentially rise nearly 40%

Published Tue, Apr 12 202211:15 PM EDT

Analysts at Bernstein identified India stocks that they expect could surge 10% or more despite growing investor concerns over global markets. In a recent note, the analysts picked stocks with an "outperform" rating, meaning the firm sees them outpacing the market index by more than 15 percentage points. Bernstein said its India portfolio has beaten the benchmark Nifty 50 index by around 700 basis points in the last two years. "While the portfolio is a composition of long-term ideas, we increase our focus on ideas where there is room for alpha generation in the near term," the analysts said. Alpha refers to an investment's excess return relative to the return of a benchmark index. Among the picks, consumer products manufacturer Crompton Greaves Consumer Electricals is the stock they see with the highest potential upside. Bernstein has a price target of 522 Indian rupees (around $6.85) for the stock, representing 38% in potential gains as compared with its Tuesday close. "Crompton's stock has seen a correction over the past few months led by concerns around the overall demand environment given an increase in product prices," the analysts said, adding that could linger in the near term. "However, we see growth resumption as the price hikes get digested. We also see a positive real estate cycle and a solid start to the summer as a critical driver in the near term," they said. The other consumer discretionary stock that the analysts like is automaker Maruti Suzuki , citing a new product cycle and benefiting from a low base. Among financials, Bernstein sees the highest potential returns for HDFC Bank , with a price target of 1,890 rupees per share (about $24.82), representing 27% upside from its Tuesday closing level. HDFC Bank had previously underperformed the market due to factors such as declining margins, but Bernstein analysts see the firm making a comeback this year as it "addresses the shortcomings and positions itself as a stable-growth retail-focused lender." "The asset quality issues from the Covid period are primarily resolved, and we expect the bank to continue its momentum on growth and digital delivery," the analysts said. Bernstein also likes Bandhan Bank's stock and has set a price target of 420 rupees (about $5.52) per share, or more than 25% higher than where it closed Tuesday. Bandhan announced large provisioning — funds set aside to cover expected future losses — in the second quarter of the 2022 financial year, the analysts noted. "[Bandhan] has stated that the Q2 provisions cover all potential credit losses from the pandemic, and high customer recoveries may lead to a write-back in provisions," the analysts said. "As borrowers clear arrears and [non-performing asset] levels recede, we expect to improve the bank's profitability." Elsewhere, the analysts picked five stocks across IT services and health care, which it called "growth defensives." "We believe they will serve as better defensive sectors than staples or utilities," they said. The stocks across the two industries are: Tata Consultancy Services , Infosys , Tech Mahindra , Dr. Reddy's Laboratories and Biocon .

A pedestrian speaks on a mobile phone as he looks at share prices on a digital broadcast outside the Bombay Stock Exchange (BSE) in Mumbai on November 10, 2020.

PUNIT PARANJPE | AFP via Getty Images

Analysts at Bernstein identified India stocks that they expect could surge 10% or more despite growing investor concerns over global markets.