PTC Industries, Hitachi Energy India, C.E. Info Systems, TBO Tek, MakeMyTrip, Suven Pharmaceuticals, Bharti Airtel, Apollo Hospitals, UNO Minda, Data Patterns (India), and KEI Industries are among its top buy-rated stocks.
The brokerage said it sees a case for the stock market to perform better after the underperformance this year, the largest in the past two decades.
“With a year-long earnings downgrade cycle stabilising in the past few months and showing signs of recovery, coupled with our expectations of policy-driven easing financial conditions going forward, we now see a case for Indian equities to perform better over the coming year and moderate its significant underperformance vs. the region,” said Goldman in a note to clients over the weekend.
The brokerage said Indian equities have been modestly up (3% in dollar terms) this year in what has been one of the strongest years for emerging markets (30%).
Despite the underperformance, India’s share valuations remain high, it said. “While India’s high valuation has been the most common investor concern and at 23 times (Price to Earnings ratio) 12-month forward valuations, India remains the most expensive market in EM, we expect moderate de-rating of 5% in our base case and 9% in our bear-case scenario over the next two years,” the firm said. Goldman said India’s PE valuation premium compared to the Asian region has come down from 85-90% peak over the past two years to 45% currently, close to the 20-year average of 35%.
“History suggests at current levels of PE premium, India has modestly outperformed the Asian region over the next 6-12 months,” the brokerage said.