While 2023 has been a wild ride for stock investors in India so far, market volatility doesn’t mean that there aren’t enough front-line stocks with interesting tales of their own this year.
There are several stocks that could outperform on the back of strong fundamentals and growth drivers, from sectors ranging from lending, IT services, telecom, infrastructure, engineering, FMCG and energy sectors.
The common thread binding these names is their strong competitive position in resilient sectors, quality management track record and earnings visibility.
Here is the list of the top 10 Nifty stocks that investors should track closely in 2023:
The oil-to-telecom conglomerate is expected to continue its strong run in 2023. Its consumer-facing businesses like telecom and retail have growth runway. Jio added 6.4 million subscribers in Q2FY23, now reaching 430 million. Reliance Retail saw a 42% revenue jump with over 3,700 stores added. With high margins and market dominance, these segments will propel future growth along with traditional energy businesses as the economy rebounds.
India’s largest private sector bank is poised for robust performance. Loan book growth has steadily risen back to the 20% range after the pandemic shock. Asset quality remains pristine with gross NPAs below 1.3%. HDFC Bank has built resilience to withstand global turmoil. The upcoming merger with HDFC Ltd. will create a financial services behemoth further strengthening its competitive positioning.
The IT services major is expected to post steady growth despite global recession worries. Demand environment remains strong as global firms continue to invest in digital transformation. Infosys’ end-to-end capabilities, rising share of digital revenue and partnerships with leading cloud service providers position it well to tap market opportunities. Moderate valuations make it an attractive bet.
ICICI Bank has posted strong results throughout 2022 signaling its emergence from COVID-induced stresses. Core operating profit grew 25% in H1FY23. Slippages are moderating while credit costs have declined. Its subsidiaries in insurance and broking also give diversified revenue. The bank is strongly capitalized for growth. With robust retail lending and digital focus, it is one of the better plays in the banking sector.
The public sector banking giant is favorably positioned owing to loan growth, higher rates and solid asset quality. SBI’s loan book grew 20% in Q2FY23 driven by retail and MSME. Higher yields will aid margins while credit costs are normalizing. Slippages remain low at 1.13%. With a healthy CASA ratio and market-leading position, SBI looks attractive from a medium-term perspective.
Larsen & Toubro
L&T is among the largest beneficiaries of the government’s infrastructure capex push. Order inflows rose 22% in Q2FY23 taking the order book past Rs. 3.8 lakh crore. Revenue and margins are seeing steady improvements as execution ramps up. L&T is also deleveraging its balance sheet while focusing on asset monetization. Its pedigree in executing complex infrastructure projects makes it a proxy for India’s long-term growth story.
Axis Bank’s diversified loan book is supporting growth while asset quality has improved substantially. Gross NPAs declined to 2.5% as of September 2022. Higher interest rates will help NIMs while operating expenses are being optimized through digital channels. The focus is on building a sustainably profitable franchise. With robust liability franchises and strengthened risk framework, Axis Bank is back on a growth track.
Bajaj Finance has built a leadership position in consumer lending which will enable healthy growth despite macroeconomic uncertainty. New loans booked jumped 42% in Q2FY23 to 8.9 million. Deposits also grew by 28%. Bajaj Finance’s digital transformation, data analytics strengths and extensive network give it an edge in tapping consumer demand across tiers.
India’s second largest telecom operator stands to benefit from the market share gains from Vodafone Idea’s financial woes. Airtel has also built formidable capabilities beyond mobility services across homes, DTH, enterprise and digital segments. Its strong balance sheet, steady ARPU hikes and 5G rollout place it in good stead to capitalise on sector growth tailwinds as wireless penetration deepens.
Diversified FMCG major ITC saw a solid 28% revenue growth in the first half of FY23 driven by robust demand, distribution reach and launches in new segments like dairy. Cigarettes volume rose 22% YoY. Improved sales mix and operating leverage is reflected in high operating margins above 38%. ITC’s valuation remains attractive given the potential value unlocking from demerging the hotels business.