Union Bank, GSPL Top 2 Stocks Which Can Give Up To 14% Return

Indian equity market ended the week gone by with a gain of 0.91 percent. The Benchmark Nifty witnessed a smart recovery from lower levels amidst mixed global cues.

However, volatility persisted after the IMF in its latest “Global Economic Prospects” stated that Global growth is forecasted to slow for the third year in a row in 2024, dipping to 2.4 percent from 2.6 percent in 2023.

The domestic equity indices closed higher despite volatility, investors had been awaiting CPI inflation data and key Q3 earnings. Foreign portfolio investors sold shares worth Rs 270.99 crore. Domestic institutional investors, too were net sellers to the tune of Rs 3349.22 crore in the Indian equity market till January 11.

Stronger-than-expected US labor data caused a reassessment of expectations for early interest rate cuts amongst traders. On the last trading day of the week Indian equity market traded higher on the back of IT stocks which soared 3-7% after two industry majors — Tata Consultancy Services and Infosys — released their December quarter results that rekindled hopes of improved earnings in the coming quarters amid strong new deal wins.

Also read: Sensex, Nifty Hit New Highs Propelled by IT Stocks; Wipro Rallies 8%

Going ahead, the market is presently eyeing upcoming triggers such as inflation data, bank loan growth, and the Q3 earnings season. Global cues would however continue to remain mixed. This comes following cautious comments from Fed officials after the release of hotter than-expected U.S. consumer price inflation data. Investors would also keep a close watch on the oil price movements after the UK allowed military action in Yemen.

Here are the top 2 stocks which can give up to 14% return:

Union Bank of India | CMP: Rs 131.25 | Target: Rs 150 | Upside: 14.3%

Union Bank of India is witnessing healthy traction in loan growth, led by continued strength in Retail. Corporate and SME segments are also seeing improving trends. The bank is seeing good traction in the steel, cement, power, and infrastructure sectors. Overall, the management expects credit growth to be around 10-12 percent in FY24.

On the deposit front, the bank is growing retail deposits at a steady pace. It aims to grow deposits through CASA/retail terms and not via bulk deposits. The bank has excess liquidity of Rs 77,000 crore and will utilize this to fund growth.

The bank thus expects a 20-30 bps increase in lending yields on a sequential basis which will support margins. Thus, the bank expects NIM to remain at around 3 percent by the end of FY24. Nearly 63 percent of the total unsecured personal loans are attributed to the salaried segment. Its asset quality continues to improve with a constant
moderation in NPA ratios. Slippages have primarily been led by the MSME segment, while the corporate segment has remained fairly strong.

Overall, Union Bank expects recoveries of Rs 16,000 crore, while it expects slippages of Rs 13,000 crore in FY24. We are positive on Union Bank of India. There is traction in the banking space and robust credit growth and pristine asset quality will help in improving the overall performance of the bank.

Gujarat State Petronet | CMP: Rs 323 | Target: Rs 365 | Upside: 13%

Gujarat State Petronet Ltd. is a key beneficiary of lower gas prices with growth in transmission volumes primarily seen across City Gas Distribution (CGD), fertilizer, and power sector. Softer LNG prices and stable domestic gas prices will help the company increase its transmission volumes. Along with this, an increase in LNG capacities and growing domestic demand will aid volume growth for GSPL.

GSPL is on a strong footing after the company’s proposed capex plan for a high-pressure gas grid, which is set to facilitate gas transportation from newer Liquified Natural Gas (LNG) terminals. Higher gas supplies with the commissioning of new LNG terminals in Gujarat, rise in domestic gas supply, and the government’s target to increase the share of gas in India’s energy mix to around 15 percent by 2030 (from 6 percent currently) and thrust to reduce pollution provides a strong gas transmission volume
opportunity for GSPL.

Regulatory tailwinds, potential higher domestic gas production, and proximity to LNG terminals make GSPL a strong long-term bet on the robust outlook for gas demand in India. Moreover, the Gujarat state government’s recent policies on dividend distribution, bonus issues, and share buyback would improve shareholder return in the coming years.

We are positive on Gujarat State Petronet given the increasing gas demand and declining LNG prices to aid margin improvement.

Disclaimer: The information provided in this blog post is for informational purposes only and should not be construed as investment or trading advice. The author is not a financial advisor and does not have any professional qualifications in this area. The author does not guarantee the accuracy or completeness of the information provided. Any action you take based on the information in this blog post is done at your own risk. Please consult with a financial advisor before making any investment decisions.