Over half of the Nifty stocks are trading at a 72 per cent discount to their 10 year valuation averages, according to ONGC, Tata Steel, Coal India, JSW Steel, ITC and Dr Reddy's Labs. Motilal Oswal said that the 50-pack barometer is trading at record highs, even as Motilal Oswal's latest bulls bears report suggested.
Many of these stocks have price targets that suggest there is limited upside ahead.
The steepest discount for any Nifty constituent is 72 per cent. ONGC's 12 month trailing PE multiple was 2.4 times as of November 30, at a 72 per cent discount to its historical average of 8.3 times. The oil gas sector, on the other hand, traded at a P E ratio of 12.6 times against the historical average of 11.9 times. ONGC has an average target price of Rs 174.57, suggesting a 21.44 per cent potential upside. The data is available from Trendlyne.
Tata Steel shares traded at a 63 per cent discount at 7 times November-end against a 10 year average PE of 19 times. Metals, as a sector, is trading at an EV Ebitda ratio of 4.9 times, 25 per cent less than its 10 year historical average of 6.6 times.
The average brokerage target on Tata Steel is at Rs 105.43, which suggests a 8.99 per cent potential downside for the stock.
Coal India traded at a 47 per cent discount to its historical average, while JSW Steel and Dr Reddy's Labs traded at discounts of 35 per cent and 26 per cent. This was on a trailing PE basis.
Coal India has a price target of 19.40 per cent of the potential upside and JSW Steel's price target suggests a 25.4 per cent potential downside. The price target of Reddy's Lab suggests a 15 per cent upside potential. The government has rolled back the export duty on steel and iron ore to previous levels. Concerns over Chinese economic growth and nationwide protest due to the strict implementation of its zero-Covid strategy have resulted in a weakness in commodity prices.
Private banking space is trading at a PBV ratio of 2.7 times, which is slightly above its historical average of 2.5 times, and the private banking space has traded at up to 42 per cent discount to their trailing 12 month price-to- book value PBV.
Most banks expect the momentum to continue in loan growth, led by continued traction in the Retail and SME segments, while the corporate segment is likely to see a healthy recovery, with strong systemic loan growth for the system 17 per cent in November. Motilal Oswal said that while we expect the momentum to continue, we remain watchful of further monetary tightening and rising inflation, which can cause a disruption in the capex cycle and delay the recovery in the capex cycle.
IndusInd Bank's price target suggests a 8.6 per cent upside, HDFC Bank 13.38 per cent and ICICI Bank 10.25 per cent upside.
Motilal Oswal said that FMCG major ITC traded at a PE of 20.7, down 16 per cent from its 10 year average of 24.5. The average target price of ITC is at Rs 373.92, as per Trendlyne, suggesting a potential 11.9 per cent upside.
Apollo Hospitals, Sun Pharma and Cipla, and the Aluminium maker Hindalco are some other stocks that trade at a discount to historical averages, and are some of the few that trade at a discount to historical averages. The average target of Apollo Hospitals suggests 10.2 per cent potential upside, Sun Pharma's 7 per cent, Cipla's 8.2 per cent and Hindalco's 7 per cent.