Top two Nifty 50 stocks to buy in market correction

In the wake of a recent market downturn, savvy investors may be on the lookout for hidden opportunities within the Nifty 50. Despite ongoing challenges, the correction has revealed appealing valuations in some blue-chip stocks with strong fundamentals. This creates a potential buying opportunity for those aiming for long-term wealth growth So, let’s dive in and identify the two Nifty 50 gems.

HDFC Bank Ltd

HDFC Bank appears to be the next standout performer in the Nifty 50. The stock is trading within a wider range due to the merger of HDFC and HDFC Bank. The merger caused selling pressure as the holdings of Asset Management Companies (AMCs) exceeded 10%, leading to stock consolidation.

The Bank’s consolidated net revenue surged by 113.5% to Rs 7,177 crore for the quarter ended December 31, 2023. The consolidated profit after tax for the quarter ended December 31, 2023, stood at Rs 1,726 crore, reflecting a 35.9% increase. Advances and deposit growth are at 21% and 20% CAGR, respectively.

However, the merger did introduce some hurdles, such as an increase in yield and cost of funds. The Net Interest Margin decreased to 3.4%, and the bank faced the impact of the incremental capital reserve ratio imposed by the RBI, which has now been revoked.

In terms of valuation, the PE ratio is at 16.8, with a 3-year average PE at 21.7 and a 5-year PE at 23.9, indicating that the stock is undervalued. The outlook suggests a focus on relationship building, customer retention, and creating a financial product ecosystem. The CEO envisions substantial GDP growth, and the management sees HDFC Bank as a technology company expanding its branches every year.

Looking at the charts we can see the trading range of Rs 1,200 to Rs 1,750.

HCL Technologies Ltd

HCL Technologies is a player in the technology sector, offering a range of services like technology architecture, digital engineering solutions, and domain-specific software across its three segments: IT services, engineering, and software products.

One key strength of HCL Tech lies in its ability to retain talent, as evidenced by its relatively low attrition rate when compared to industry peers. This is crucial in an industry where skilled professionals are in high demand.

In the second quarter of FY24, HCL Technologies secured an impressive 16 large deals, with 10 in services and 6 in software, totalling a substantial USD 4 billion, a historic high for the company. The Return on Invested Capital (ROIC) stands at an impressive 32.2%, reflecting the efficiency.

HCL Tech is actively investing in generative AI, with over 1,00,000 employees ready to contribute to this evolving field. The company is strategically focused on deepening expertise, cost optimization, and initiatives like large outsourcing deals and vendor consolidation. Additionally, HCL Tech emphasizes training and capability building in generative AI, positioning itself at the forefront of technological advancements.

While the company has revised its organic revenue growth for FY24 downward to 4-5% from the earlier projection of 6-8%, the long-term outlook for the IT sector remains optimistic.

Analyzing the chart, HCL Tech’s stock exhibits a bullish trend, consistently showing upward movement. This indicates positive market sentiment and investor confidence in the company’s strategic direction and growth prospects.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.