Tata Steel, IndusInd Bank, Apollo Tyres, ONGC, ITC: Nifty stocks that trade at deep discount to 10-year averages
Tata Steel, IndusInd Bank, Apollo Tyres, ONGC, ITC were among Nifty companies, which quoted up to 61 per cent discount to their historical price to equity (P/E) or price to book value (P/BV) levels at January-end. The month saw the NSE barometer falling 2.45 per cent, which was in addition to a 3.48 per cent drop in December. Stocks declined, especially towards the end of January amid concerns over the Hindenburg report, ahead of the Union Budget and money policy decisions by central banks globally.
Data showed the steepest discount for any Nifty constituent was 61 per cent. Steelmaker Tata Steel traded at a 12-month trailing PE multiple of 7.3 times, as of January 31, which was at 61 per cent discount to its historical average of 8.3 times. The company reported a net loss of Rs 2,502 crore for the December quarter compared with a net profit of Rs 9,598 crore in the year-ago period.
ONGC shares at 3.3 times trailing 12-month EPS were available at a 60 per cent discount to their 10-year average P/E of 8.5 times. Coal India (44 per cent discount), Apollo Hospitals (35 per cent discount)┬а
Among sectors, Eicher Motors (discount 27 per cent), Maruti Suzuki (12 per cent) Hero MotoCorp (10 per cent), Bajaj Auto (8 per cent) and Mahindra & Mahindra (6 per cent) were some stocks that traded at discount to historical PE levels, suggests Motilal Oswal’s monthly Bulls & Bears report.
In the banking space, IndusInd Bank (47 per cent discount) and Kotak Mahindra Bank (17 per cent) traded at discount to their historical P/BV levels. HDFC Life and SBI Life traded at up to 36 per cent discount to historical valuation averages.
In the FMCG space, ITC traded at a 13 per cent discount to its 10-year average PE of 24.4 times.
Apollo Hospitals, Cipla and Sun Pharma from pharma sector, Hindalco and JSW Steel from metals & mining sector and UPL from agrochemicals sector traded at a discount to historical averages. ┬а┬а
Motilal Oswal’s stock picks
The brokerage sad corporate earnings so far have been in line with the performance of heavyweights, such as Tata Motors, Coal India, Axis Bank, ICICI Bank, HDFC Bank, Maruti Suzuki, and TCS, driving the aggregate.
“After the recent correction, valuations are in the fair value zone with Nifty trading at a one-year forward PE of 18 times, thus, offering room for upside, if the corporate earnings delivery continues. We prefer BFSI, IT, industrials, auto, and cement, while we are underweight on Energy in our model portfolio,” Motilal Oswal said.
The brokerage prefers L&T, Axis Bank, Bajaj Finance, Bharti Airtel, TCS, ITC, Titan, ONGC, Maruti Suzuki, and Sun Pharma among large caps.
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