Long-Term Stocks to Watch: HDFC Bank, Maruti Suzuki, and Other Undervalued Picks Amid Ongoing Market Rally

Indian Stock Market Jumps Amid Global Rally, Analysts See Attractive Valuations

The Indian stock market experienced a significant surge on Wednesday, with the frontline indices Sensex and Nifty 50 rising by over 2% each. This increase follows a rally in global markets, driven by hopes of an end to the prolonged US-Iran war in the Middle East. However, volatility remains high due to conflicting signals from the war and uncertainty over the reopening of the Strait of Hormuz.

Nifty 50 Falls 10% in One Month, Making Valuations Attractive

The benchmark Nifty 50 has experienced a sharp correction, falling 10% in one month. Analysts believe that this correction has made valuations in the Indian stock market attractive. At approximately 17.3x, Nifty trades 7% below its 10-year average of 18.6x, placing it in a historical "bounce zone". According to Elara Capital, this level usually acts as a floor for valuation, even during extreme disruptions such as the COVID-19 pandemic and the Russia-Ukraine conflict.

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Elara Capital Identifies 20 Value Plays with Healthy Fundamentals

With a base case assuming gradual de-escalation in the US-Iran war, Elara Capital believes that the current valuation provides a favorable entry point with limited downside. The brokerage firm has identified 20 value plays that offer a good risk-reward opportunity, with healthy fundamentals in the current scenario of extreme correction.

Preferred Bets: Auto & Power Sectors

Elara Capital's preferred bets amid the present market conditions are the auto and power sectors. Large-cap auto stocks, such as Maruti Suzuki and Eicher Motors, have corrected sharply since the onset of the US-Iran war. Despite near-term concerns, underlying retail data remains robust and encouraging, with vahan retail registrations showing strong double-digit growth.

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This momentum is expected to receive further tailwinds from the Eighth Pay Commission awards, slated for announcement early next year. Elara Capital continues to value Maruti Suzuki at 28x FY28E P/E and Eicher Motors at 33x FY28E P/E for its Royal Enfield business.

Power Sector Shows Relative Resilience

Within the power sector, 18 out of the 19 utility stocks under Elara Capital's coverage have outperformed the Nifty 50 in the current drawdown, underscoring the sector's relative resilience. The escalating conflict is expected to accelerate India's electrification cycle, while surging data centre capex is driving incremental power demand.

Stocks to Buy for Long-term

Elara Capital recommends the following stocks for long-term investment:

Largecap Stocks:

• HDFC Bank
• Larsen & Toubro
• Maruti Suzuki
• Axis Bank
• Titan Company
• Eternal
• Eicher Motors
• LTIMindtree
• Apollo Hospitals Enterprise
• Polycab India

Midcap Stocks:

• United Spirits
• GMR Airports
• UNO Minda
• IDFC First Bank
• Godrej Properties

Smallcap Stocks:

• Gland Pharma
• Gabriel India
• BEML
• Ujjivan Small Finance Bank
• Safari Industries