Macquarie lists 7 largecap ideas with a potential upside of over 20%

Global brokerage firm Macquarie carries a 60 bps 'overweight' position on India, which is down from over 80 bps in February 2020 and 130 bps in December 2019. In a recent report, Macquarie noted that while 2020-2021 will reflect an anomalous COVID collapse and recovery, it is likely that India’s long-term trajectory will be closer to 5 percent than to 7 percent. This is due to erratic policies (albeit improving and supportive recent reform measures), supply-side bottlenecks and gummed-up banks preventing India from realising its full potential, added the brokerage. It also stated that India is also the most expensive EM with one of the deepest likely downgrade cycles. Despite not a very positive view, the brokerage lists 7 largecap ideas (over $10 billion mcap) with a potential 20 percent upside for 2021. Here's the list:

Infosys: The brokerage expects Infosys to post the strongest dollar revenue growth in the large-cap Indian IT services space over FY21-23 aided by strong deal wins. Recent large deal wins like the Vanguard deal help accelerate growth, it added.

Bharti Airtel: As per Macquarie, strong earnings momentum from FY22E with rising ARPU and margins will help the firm perform better. Africa's business potential is still under-appreciated, it added.

L&T: The firm is a key play on progress made on India’s $1.4 trillion National Infra Pipeline, said the brokerage. L&T's market cap to order book is at multi-year lows, however, Government fiscal stimulus targeted on infra and L&T’s divestment represent optionality, stated the brokerage.

HCL Technologies: The brokerage expects HCL Tech to benefit significantly in cloud transformation spending globally as enterprises prepare for cost savings and improving technology adoption. The firm has been gaining traction, as witnessed in recent large deal wins, it further noted.

HDFC Standard Life Insurance: As per the brokerage, the sustainability of individual premium growth and higher sales of protection products will lead to margin expansion and higher absolute VNB (value of the new business) growth for the firm.

BPCL: Government privatisation will further raise the target for the stock. The target price in Macquarie's base-bull case is Rs 510-690 indicating a 30-80 percent upside.

Dr. Reddy's: With strong launch momentum across markets, improving productivity and optionality from its COVID-19 vaccine contract, the company's earnings can surprise positively, stated the brokerage.