Elara Securities picks ICICI Bank, warns of auto margin risks from raw material costs

According to fresh market updates, Elara Securities has named ICICI Bank as its top stock pick, citing firm expansion visibility and minimal risks, while maintaining a wary but positive stance on the automobile sector due to rising raw material costs.

Speaking with CNBC-TV18, Bino Pathiparampil, Head of Research at Elara Securities, stated auto and general consumption demand is anticipated to stay robust heading into the festive season and likely the subsequent quarter. The momentum observed during the past two quarters should sustain for the next one to two quarters.

That stated, he warned that escalating raw material prices will impact firm margins and potentially dampen demand beyond that timeframe. "So while the demand volume expansion may be firm, firm margins may start taking some kind of hit," Pathiparampil stated. He noted that automakers might pass these cost increases on to end consumers within the next one to two quarters, which could pose a risk to overall demand.

The brokerage is adopting a wait-and-watch approach, as the situation stays dynamic and dependent on crude prices, geopolitical risks, and associated logistical issues. Elara Securities maintains a positive stance on the auto sector but stays wary regarding raw material price increases and consequent policy pressure.

When asked for a high-conviction investment idea, Pathiparampil highlighted the banking sector, specifically naming ICICI Bank as the top pick. He pointed out that large-cap stocks have become highly attractive following recent time and price corrections, with banks, life insurance, and power utilities standing out.

"If I have to pick one from that, I would stick to banks where expansion visibility is good, risks are very minimal, and execution has been so far very good," he stated, cementing ICICI Bank as the firm's preferred choice.