analysts

(Bloomberg) — As India prepares to celebrate its Diwali festival this weekend, stock brokers see growing signs of an economic recovery from the pandemic as reason to cheer and advise investors to buy cyclical stocks.

Companies in sectors including cement, housing, software, healthcare, telecommunications and financials are among their top picks as business activity in the nation picks up pace after the world’s largest lockdown. Diwali, the Hindu festival of lights, is considered auspicious for purchases of everything from automobiles to apartments, and even shares.

India’s factory output turned positive for the first time in seven months in September, official data showed Wednesday. And the benchmark S&P BSE Sensex climbed to a record this week as foreign purchases of local stocks surged.

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Sensex has recovered sharply to reach new highs this year

“With economic activity recovering fast, more earnings upgrades cannot be ruled out,” according to Motilal Oswal Financial Services Ltd. in a note. “Strong global markets can keep liquidity abundant in the system, providing support to the overall market.”

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Here are some of analysts’ top picks for the festival season:

IIFL Securities

Reliance Industries Ltd.Retail and telecom businesses have enabled significant deleveraging and are turning in solid performance, offsetting weakness in refiningEntry into post-paid and enterprise segments, collaboration with Google for entry-level smartphones will drive growth for JioInfosys Ltd.Should outperform Tata Consultancy Services Ltd. on revenue growth in FY21 for the first time in 15 yearsWith investment phase completed, margins should start to improve

Anand Rathi Securities

Divi’s Laboratories Ltd.Leading manufacturer of active pharmaceutical ingredients, with over 70% of revenue from Europe and U.S.Good growth prospects thanks to supply-chain changes and diversification away from ChinaVIP Industries Ltd.Demand for luggage is gradually recovering as malls reopen and travel resumesStrong balance sheet and market-leading position make it better placed to deal with tough market conditions than peers

Motilal Oswal

Bharti Airtel Ltd.Posted strong India mobile Ebitda growth of 16% cumulatively for last two quartersRobust 10 million subscriber base

State Bank of India

Earnings normalization has begunBest play among public-sector banks on gradual economic recoveryHealthy provision coverage, robust capitalization, strong deposit base and improved core operating profitability

Axis Securities

Can Fin Homes Ltd.Strong balance sheet, low bad loans, strong underwriting and well-spread loan bookAbility to improve net interest margin in tough environmentShould recover more quickly than peers due to its loan mix and negligible exposure to property developersDalmia Bharat Ltd.To benefit from revival in cement demandCapacity expansion, better monitoring of cost drivers and increased realization to drive sales and profit growth

Nirmal Bang Institutional Equities

HCL Technologies Ltd.To benefit from digital infrastructure buildout catalyzed by the pandemic, a 3-5 year opportunityHas the biggest opportunity among among Indian players, with about 30% of its revenue coming from helping clients move infrastructure to the cloudInox Leisure Ltd.Considerable room for growth at an attractive valuation from a medium-term perspectiveShould benefit from pent-up demand among filmgoers and closures of single-screen and smaller theater chainsStrong balance sheet is a big positive over PVR