Mumbai: HSBC Securities said it sees a ‘potential Goldilocks scenario’ supporting the ongoing bull run in the stock market. The brokerage said its top picks are , , , , Tata Motors, , DMart, , , , L&T, , , and for the expected risk-on rally. In a Goldilocks scenario, the market gives stable returns but does not get into a runaway mode.
“With moderating inflation expectations, the market has rallied strongly. The question is whether the gains are already priced in,” said HSBC’s analysts Amit Sachdeva, Anurag Dayal and Herald
Linde in a note to clients. “We see several factors moving in the right direction for a Goldilocks scenario, which could continue to lend support for the bull run.”
The Nifty and the Sensex have run up around 17-18% from their June 17 lows. Both indices are around 3% away from their all-time highs. HSBC said Nifty’s valuation, measured by Price to Earnings (PE) ratio at 19.6 times, has recovered above its five-year mean but is still 15% below its peak of 23 times in October 2021 when the Sensex and Nifty hit all-time highs.
Among sectors, valuations of only finance, materials and energy companies are below their five-year means. Out of the three sectors, its most preferred one is financials citing attractive valuations, under-ownership and strong earnings outlook.
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