RITES, ICICI Lombard 2 stocks Which Can Return Up to 16%

Indian equity market ended with a decline notably last week, mirroring mixed cues from global markets. Markets remain attached to the prospect of a March US rate cut despite cautious comments from several Federal Reserve officials in recent sessions. World stocks and bonds took a hit during the week as central banks pushed back against interest rate cut bets, while signs of a patchy economic recovery in China drove shares in the world’s second-biggest economy to their lowest in almost five years.

The domestic benchmark index also comes out of an exuberance, over-extended rally. With the Bank Nifty registering the worst fall in two years. Given the earnings of index heavyweight, HDFC Bank, the index drifted lower. At no point did the bulls put up a fight, India VIX too rose to close around 15.

Also read: Here’s Why Bajaj Auto Was The Top Nifty50 Gainer After Q3 Earnings?

The present fall is just a normal correction to the mega-bull trend that we are witnessing. The equity benchmark index bounced back amid a rally in the global markets. Moreover, impressive quarterly results, the hope of a favorable Union Budget, and positive domestic macro data also added fuel to the market sentiment. Key to highlight that the Rail stocks witnessed a dream run this week on expectation of good quarterly results.

Sentiment was boosted after the Rail minister said that the government would scale up the production of Amrit Bharat trains.

Corrections are part of and parcel of a trend. Structurally, the index is undergoing a breather after a 17 percent rally seen over the past two months.

However, the formation of a higher peak and trough on the larger degree chart signifies a robust price structure. Thus, the focus should be on accumulating quality stocks in a staggered manner amid the ongoing earning season.

Here are the top 2 stocks which can give up to 16% return

RITES Ltd.: CMP: Rs 625 | Target: Rs 725 | Upside: 16%

RITES Limited is a public sector enterprise and a leading player in the transport consultancy and engineering sector in India, having diversified services and geographical reach. The company is the only export arm of Indian Railways for providing rolling stock overseas. It has an order book of Rs 5,500 crore which is 2.2x of FY23 revenue.

In Q2 FY24, weakness in export and turnkey led to overall weakness in the revenue. However, RITES guided that they are using 3 fold strategies for bringing back revenue to historical levels. Strategy includes putting more focus on Project Consultancy, Try & Diversify Inspection Segment of business & aggressively pursuing export opportunities.

In terms of Export business, the Company is bidding for Global tenders in regions like Southeast Asia, Africa & Latin America, due to Global Competitors the Margins for these projects may differ. In Q2 FY24 order inflow of 78 orders with an inflow of Rs 3,300 crore which stood at 0.85 orders per day, RITES guided to winning 1 order a day in upcoming months.

ICICI Lombard General Insurance | CMP: Rs 1475 | Target: Rs 1665 | Upside: 12.9%

ICICI Lombard General Insurance reported healthy earnings for the nine months of FY24 (9M FY24). This was on the back of better-than-industry growth driven by the health insurance segment. The key positive development in 9M FY24 was the decline in the overall loss/ claims ratio in the motor segment. Consequently, the combined ratio improved to 103.7 percent for 9M FY24 as against 104.6 percent for 9M FY23.

The most encouraging bit was the management’s confidence in achieving high-teen growth in premium in FY25 and improving the combined ratio to 102 percent by FY25.

Also, the growth momentum in health insurance continued. ICICI Lombard’s GDPI grew by 17 percent YoY in 9M FY24. It was higher than the industry growth of 14 percent in the same period. It was driven by the strong growth in the commercial line segment, better traction in the motor segment, and the continued momentum in health insurance. For 9M FY24, ICICI Lombard is the second largest motor insurer in the country, and, with growth picking up, it achieved an industry-leading position in this segment in Q3 FY24.

The combined ratio is the sum of the loss/claims ratio and expense ratio. The management indicated that the combined ratio could move further down in FY25 as all the investments made in enhancing the distribution channel will start yielding results and will be reflected in the form of a lower expense ratio in the future.

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