With the Indian markets witnessing broad-based recovery and the benchmarks see biggest quarterly rally since 2009 in the June quarter, things on the periphery might be starting to look bright. However, Axis Securities believes that there is no more valuation comfort left across the board this year.

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Due to lack of valuation support and poor earnings forecast Axis Securities has come out with a December 2020 Nifty target of 10,620.

The market has breached the mean valuations on the upside and we find the

market not cheap even after considering the earnings are at the cyclical bottom, the brokerage firm said in a recent report.

Thus with limited upside, it finds stock picking and playing the right themes will be the key. The Nifty index has risen over 20 percent in the June quarter and is currently trading above 10,750.

Among stocks, the brokerage picks ICICI Bank, Manappuram Finance, Varun Beverages, CCL Products India, Minda Industries, ITC, MindTree, Biocon, Bharti Airtel, and HCL Technologies with expectations of a 14-41 percent upside for a 12-month period.

For the month of July, the brokerage believes that markets will be focused on quarterly results commentary, the impact of opening up of the economy, and challenges of the pandemic being still around.

IT, Consumer, and Telecom are likely to post better earnings and demonstrate better earnings growth trajectory in the upcoming results, noted the report.

Even as the bulk of the COVID impact was in Q1FY21, the impact of the compression will be seen in the forthcoming quarters as it will manifest in a slower growth rate, it added.

It further noted that after a significant period of underperformance mid-cap and small-cap stocks have picked up steam. While the broader economic challenges will continue to persist but quality mid and small-cap names will see increased allocation as they will see a consistent uptick in business in the forthcoming quarters, explained the brokerage. Pricing power will also be a key factor in picking mid and small caps, it added.

First Published:Jul 9, 2020 1:22 PM IST