Brokerage Views: Citi’s India Equity Strategy, Morgan Stanley’s IT Picks And More

Brokerages from Citi Research to Morgan Stanley and Goldman Sachs have released several notes that capture the outlook for various sectors, from foreign investment scenario and preferred picks in consumption to oil and gas and information technology. Goldman Sachs is bearish on Vodafone Idea Ltd. and Indus Towers Ltd.

NDTV Profit tracks what brokerages are putting out on stocks and sectors. Here are all the top calls from analysts you need to know about on Friday.

Citi On India Equity Strategy

FII inflows effect on commencement of US rate cut cycle:

• Net negative FII inflows in most cases, especially one to three months after US rate cut cycle. But positive over 12-month period in most cases aided by USD weakness.

• Global risk-off scenarios key driver of short-term outflows.

• Remains positive over 12 months in most cases.

• Healthcare and staples to do well over 12 months following rate cute cycle.

• Global peers believe India remains relatively better placed compared to the overall emerging markets.

Changes To Preferred Picks:

• Remove Industrials and Utilities from sector preferences.

• Add Hindustan Unilever Ltd to preferred list seeing improvement on rural side.

• Add Bharti Hexacom Ltd. to mid-cap list after initiating coverage.

• Key overweight sectors: Banks and Insurance, Telecom, Healthcare.

• Key underweight sectors: Consumer Discretionary, IT Services, Metals.

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Motilal Oswal On Coal India

• The brokerage maintained 'buy' rating, with a price target of Rs 600 apiece, implying a 21% potential upside to the previous close.

• The state-owned miner remains the top pick in metals and mining sector, as the company's volume growth outlook remains robust.

• August production numbers down on erratic monsoon.

• Power demand to move in tandem with GDP growth, which will be positive for Coal India.

• It expects the company to post a compound annual growth rate of 8% in production volume over the next two years.

• The company is increasing coal-washer capacity to strengthen its domestic coking coal position

• The brokerage maintains its revenue and operating profit (Ebitda) estimates for the current and the next fiscal.

Coal India – Volume Growth Outlook Remains Robust: Motilal Oswal

Morgan Stanley On IT

Preference:

• The investment bank prefers IT names over Engineering and R&D.

• It upgraded LTIMindtree Ltd. to 'overweight' and downgrade HCLTech Ltd. to 'equalweight'.

• Its preferred picks in the IT space is LTIM, Infosys Ltd. and Coforge Ltd.

Pecking order:

• Infosys over Tata Consultancy Services Ltd. (both 'overweight')

• LTIM over HCLT and Tech Mahindra Ltd.

• 'Underweight' on Wipro Ltd.

• First quarter marked the start of upgrade cycle, which will continue for at least next one to two quarters.

• The uptick in BFSI spending will aid high growth in the next fiscal

• For LTIM, improving deal conversion ratio, stabilising margins and wallet share gains will be the positives.

• For HCLTech, limited deal wins, share outperformance and limited signals of uptick in revenue is a concern .

On valuations and positive bias:

• The bank said valuations have become expensive.

• The top four's price-to-earnings premium to BSE Sensex is 22% compared to last five year average of 10%.

• TCS premium to Accenture is 6% versus last five year average of 1%.

• Macro data points such as US GDP, S&P 500 earnings are supportive for the IT pack.

• There are signals of sector bottoming out and a pick up in growth trend based on mixed signals from global IT companies and hyperscalers.

Morgan Stanley On Oil & Gas

• Oil and Natural Gas Corp. remains top pick, followed by Hindustan Petroleum Corp. and GAIL (India) Ltd.

• It prefers HPCL and Bharat Petroleum Corp. over Indian Oil Corp.

• ONGC: Dividend growth, recovering cash flows and better production outlook to drive rerating.

• GAIL India: Higher transmission volumes and tariffs and new pipelines to drive return-on-capital.

• Gujarat Gas Ltd.: Simpler group structure will offer 70% potential upside

• Reliance Industries Ltd.: Expect 11% compounded annual growth in earnings-per-share over three years with multiple triggers.

• It expects the next leg of rerating for Deepak Nitrite Ltd.

• Well-supplied markets, strong domestic demand and project monetisation to benefit India's energy value chain.

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Goldman Sachs On Vodafone Idea

• The bank maintained 'sell' rating on the stock, with a target price of Rs 2.5 apiece, a potential downside of 83% over the last closing.

• The recent capital raise is positive, however, it is unlikely to stop market share erosion.

• Average revenue per user would have to rise to Rs 200-270 to maintain a neutral cashflow.

• It forecast another 300 basis points loss in market share in another 3-4 years.

• The telco has large AGR and spectrum dues starting next fiscal.

• The bank expects free cashflow to be negative at least till fiscal 2031.

• The company trades at 24 times the fiscal 2026 enterprise value/Ebitda, a sharp premium to Bharti Airtel which is at 12 times.

Goldman Sachs On Indus Towers

• The stock downgraded to 'sell' with a target price of Rs 350 from the earlier Rs 434, implying a downside of 19.4%.

• The fundamentals have significantly improved, however rerating is overdone.

• There is limited visibility on medium and long-term growth outlook.

• The current share price implies 8-10% Ebitda growth till fiscal 2030, which is unlikely.

• The multiples are at significant premium to Bharti Airtel’s or Jio’s.

• Vodafone’s continued share erosion and reduction in Airtel’s tendency roll outs are negative catalysts.

Stock Market Today: All You Need To Know Before Going Into Trade On Sept. 6. Read more on Markets by NDTV Profit.