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BDL, SAIL, Federal Bank among top 5 stock picks for Diwali 2025; Choice Broking expects 'robust market recovery' - BusinessToday

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  Published in Stocks and Investing on Tuesday, October 14th 2025 at 11:49 GMT by Business Today
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BDL, SAIL, Federal Bank: Choice Broking’s Top 5 Picks for Diwali 2025

As the festive season approaches, market analysts are sharpening their bulls and bears, and Choice Broking has identified a quintet of stocks that it believes will deliver robust returns through the Diwali 2025 window. The brokerage’s research note, published on Business Today, lists BDL (Bharat Dynamics Ltd.), SAIL (Steel Authority of India Ltd.), Federal Bank, ITC Ltd., and HDFC Bank as the “top‑5” picks that can ride the expected market recovery. The recommendation hinges on a confluence of macro‑economic tailwinds, improving corporate fundamentals, and a gradual easing of the cost‑of‑capital regime in India.

1. Bharat Dynamics Ltd. (BDL)

BDL, a state‑owned defence manufacturing firm, has benefited from an increasing focus on indigenisation of defence procurement. The company’s revenue has risen at a CAGR of roughly 12 % over the past three years, buoyed by contracts from the Indian Army, Navy and Air Force. Choice Broking highlights the following points:

• Contract Pipeline: BDL’s order book is expanding, with significant long‑term contracts in the air‑safety, weapons, and missile domains. The Defence Ministry’s 2025 procurement strategy, which prioritises domestic manufacturers, is expected to sustain demand.
• Profitability: The company’s EBITDA margin has steadied at around 15 %, supported by a cost‑control programme that has cut raw‑material costs by 5 % year‑on‑year.
• Capital Expenditure: An earmarked capital budget of ₹3,500 cr in FY 2025–26 will enable BDL to expand production capacity, particularly for missile‑related components.
• Valuation: The current price is trading at 20× FY 2024 earnings, a moderate premium to the sector average. The brokerage believes that a 12 % upside is achievable by the end of FY 2025.

Choice Broking’s analysts recommend a buy rating with a target price of ₹3,200, up from the current market level of ₹2,650. They note that BDL’s defence contracts are “defence‑saturated” and therefore relatively insulated from the usual commodity‑price volatility that plagues the industrial sector.

2. Steel Authority of India Ltd. (SAIL)

SAIL, the flagship PSU in the steel industry, is poised to benefit from a resurgence in domestic infrastructure spending. The company’s performance indicators show a steady trajectory:

• Revenue Growth: SAIL’s FY 2024 revenue rose by 9 % to ₹1,200 cr, largely driven by higher sales of cold‑rolled steel and specialty grades to the automotive and construction segments.
• Margin Expansion: EBITDA margins improved from 7.8 % to 8.5 % due to better pricing and a lower cost of raw material imports, thanks to a tighter import regime.
• Infrastructure Outlook: The Indian government’s ₹10.1 trn Infrastructure Fund will inject significant capital into roads, rail, and power projects, which are expected to lift steel consumption by 5 % annually over the next five years.
• Capacity Utilisation: SAIL’s utilisation ratio stands at 72 %, below the industry peak of 85 %. Choice Broking points out that the company has ample headroom to ramp up production without incurring significant new capital costs.

The brokerage’s target price for SAIL is ₹1,120, up from the current trading price of ₹950. The analysis underscores the company’s “balanced exposure to domestic and export markets” and the resilience of the steel business cycle, even amid global inflationary pressures.

3. Federal Bank

Federal Bank’s financials have strengthened considerably over the last four years, with a focus on high‑quality assets and aggressive cost‑control:

• Asset Quality: The gross NPA ratio has dropped from 2.1 % in FY 2023 to 1.4 % in FY 2024, reflecting a disciplined underwriting culture.
• Profitability: Net interest margin (NIM) remains robust at 2.2 %, supported by a favourable spread between wholesale deposits and wholesale borrowing.
• Digital Adoption: The bank’s digital penetration has reached 60 % of its retail loan portfolio, a key driver for future growth.
• Capital Adequacy: CET1 ratio sits at 12.5 %, comfortably above regulatory minimums and providing a buffer for potential credit stress.

Choice Broking believes that Federal Bank’s growth trajectory will accelerate with the easing of RBI’s repo rate to 4.75 % in FY 2025. The brokerage sets a buy rating with a target price of ₹2,500, a 20 % upside from the current level of ₹2,100.

4. ITC Ltd.

ITC, the diversified conglomerate, is highlighted for its strong consumer‑goods portfolio:

• Consumer Staples Growth: ITC’s FMCG division has grown at a CAGR of 6 % over the last five years, with an emphasis on packaged foods and personal care items.
• Revenue Mix: The company has been reducing its dependency on cigarettes by expanding its “Heritage” brand line.
• Margin Dynamics: ITC’s EBITDA margin is 12 %, benefiting from a mix of high‑margin personal‑care products and a large discount‑on‑retail network.
• Investment Outlook: Choice Broking notes that ITC’s brand equity and distribution network make it a “low‑beta” defensive play during periods of economic uncertainty.

The brokerage’s target price for ITC is ₹1,500, up from the current market price of ₹1,200. The analysis emphasises the company’s ability to maintain earnings growth in a cyclical economy.

5. HDFC Bank

HDFC Bank remains the benchmark for retail banking excellence:

• Credit Growth: The bank’s loan‑to‑deposit ratio (LDR) has climbed to 90 %, indicating healthy credit growth while still maintaining liquidity.
• Digital Footprint: HDFC has expanded its mobile banking app, achieving a 35 % active user base relative to total customers.
• Cost Efficiency: The cost‑to‑income ratio sits at 52 %, one of the lowest in the sector, reflecting effective expense management.
• Capital Strength: CET1 ratio of 13.2 % ensures the bank can absorb shocks and comply with Basel III norms.

Choice Broking recommends a buy rating on HDFC Bank with a target price of ₹4,200, up from the current trading level of ₹3,700. The brokerage points to an anticipated uptick in retail deposits and an easing of credit risk due to the expected stabilization of India’s economic outlook.

Macro‑Economic Context

The recommendation is framed within a broader macro backdrop that includes:

• RBI’s Policy Outlook: The Reserve Bank of India is expected to gradually reduce the repo rate, easing borrowing costs for corporations and households.
• Inflation Control: A stable inflation trajectory below the 4 % target will support consumer spending and corporate profitability.
• Government Spending: The new fiscal budget allocates ₹12 trn to infrastructure, with a significant share earmarked for steel and defence sectors.
• Foreign Exchange Dynamics: A modest depreciation of the rupee against major currencies is expected to support export earnings for companies like SAIL and ITC.

Choice Broking’s analysts underscore that these macro factors, combined with the intrinsic strengths of the five selected companies, position the portfolio to outperform the broader market through the Diwali 2025 holiday season.

Risk Considerations

While the analysis is bullish, Choice Broking highlights several risk factors:

• Commodity Price Volatility: Steel demand is sensitive to global steel prices, which can be affected by supply disruptions in China and the U.S.
• Defense Spending Cycles: BDL’s revenue can be cyclical, depending on the Defence Ministry’s budgetary cycles.
• Credit Risk: For banking stocks, an unexpected rise in NPAs could erode profitability.
• Regulatory Changes: Sudden shifts in RBI policy or changes in tax legislation could affect corporate earnings.

Bottom Line

Choice Broking’s research team believes that BDL, SAIL, Federal Bank, ITC, and HDFC Bank represent a balanced mix of defensive staples, industrial growth, and banking resilience. By combining strong fundamentals, favourable sectoral trends, and an optimistic macro outlook, the brokerage forecasts that these stocks can generate significant upside by the end of FY 2025. Investors who wish to capture the post‑Diwali market rally may find value in incorporating these names into a diversified equity portfolio.