The June-quarter earnings for Nifty50 companies were largely muted, hurt by weak demand, slow private sector capital expenditure, liquidity tightness, and global trade issues.

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A large number of brokerages have revised their ratings following June-quarter results.

According to Kotak Institutional Equities, there has been a big mismatch in earnings expectation at the start of the fiscal year and the actual numbers that were reported by the realty sector at the end of the year.

For Reliance Securities, the Q1FY20 earnings season had more misses than hits. "Aggregate Nifty earnings grew by 3.5 percent YoY primarily driven by the financials, while ex-BFSI earnings declined by 12 percent YoY", the brokerage said in a report.

Motilal Oswal believes that the Nifty is still expensive at 19.7 times its FY20 earnings estimates, despite several of its constituents trading at substantial 30-40 percent discount to their respective long-period average valuations.

"Nifty PAT grew 5.1 percent YoY versus MOSL's estimate of 11.5 percent YoY. Excluding Corporate Banks, Nifty PAT was down 6.4 percent YoY versus an estimate of a 3.8 percent decline," Motilal Oswal said in a report.

On the global front, IT companies have indicated weakness in BFSI while auto and metal sectors have highlighted rising uncertainty due to political and trade conflicts.

Brokerages have recommended the following stocks as their top picks after Q1 results:

Reliance Securities

Though the banking sector was the primary contributor to earnings growth, the sectoral growth is attributable to lower YoY base. ICICI Bank and HDFC Bank are the top picks in the banking sector.

The consumer sector reported better-than-estimated performance despite the Street expecting a weak operating performance. It was led by the key sectoral players Asian Paints, Dabur, HUL, and Marico. Top-pick remains HUL.

The IT sector continued to register healthy operating performance with good deal wins and improving traction in Digital Services business. Sectoral revenue performance was a mixed bag with the BFSI vertical outlook being marginally muted. The brokerage continues to remain positive on IT sector, Top-picks: TCS and HCL Tech in large-cap space and Hexaware and Sonata amongst the mid-caps.

The automobile sector reported subdued performance largely in- line with our expectation. Further, the management commentaries across the board were muted with no major company giving any guidance for the year amid uncertain demand environment. The brokerage upgraded its recommendation on Hero MotoCorp.

Among other stocks, L&T, which is the major constituent for the industrials sector, reported in-line numbers. In telecom space, Bharti Airtel reported a decent set of numbers despite a declining trend reported by Vodafone-Idea.

Motilal Oswal

The portfolio strategy remains premised on earnings visibility and valuation comfort.

Motilal Oswal has raised the weights of defensives in its model portfolio – reintroduced ITC and added weights in Bharti Airtel, HDFC and NTPC.

Top large-caps picks include SBI, ICICI Bank, L&T, Infosys, Bharti Airtel, NTPC, Titan, HUL, HDFC, Ultratech.

Top midcap picks include Federal Bank, RBL, Indian Hotels, ABFRL, Ashoka Buildcon, IPCA, SRF, Mphasis.

Elara Securities

In the auto sector, the brokerage is bullish on Maruti Suzuki, TVS Motors, and Exide Industries, while, SpiceJet and InterGlobe Aviation are top picks in the aviation sector.

Among financials, the brokerage prefers Axis Bank, City Union Bank, ICICI Bank, and DCB Bank, meanwhile top IT picks include HCL Tech, Wipro, Tech Mahindra.

Antique Research

Top large-cap picks for the brokerage are HDFC Bank, ICICI Bank, L&T, Asian Paints, Ultratech Cement, Avenue Supermarket, Adani Ports, Marico, UPL, Dr Reddy, Siemens, NMDC and Muthoot Finance.

Meanwhile, top midcap stocks post-earnings are Honeywell Automation, TVS Motor, Federal Bank, Gujarat Gas, Phoenix Mill, NIIT Technology, Kajaria Ceramics, Timken India, Johnson Control and Ashoka Buildcon.

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First Published:Aug 21, 2019 10:06 AM IST