Tata Steel, ONGC, DRL, BPCL, Maruti: Nifty at record high but these stocks lie at deep discount to historical averages

With Nifty hitting record high level at the beginning of 2024, a host of index constituents including Grasim Industries Ltd, Tech Mahindra Ltd, Divi's Labs Ltd, Reliance Industries Ltd and LTIMindtree Ltd are trading at a huge premium to their 10 year valuation multiples. Yet there are still many stocks in the Nifty pack that trade a steep discount to historical averages.

They included Oil & Natural Gas Corporation Ltd ( ), , Dr Reddy's Laboratories Ltd, BPCL and Maruti Suzuki India Ltd. On a broader basis, Nifty traded at a 12 month forward price to earnings (PE) of 19.6 times, which is roughly its LPA of 20.2 times. On a price to book value basis, it traded at 3.2 times, which represents a 15 per cent premium over its historical average of 2.7 times, Motilal Oswal Services said in a note.

The brokerage noted that private banks and oil and gas stocks now trade in a reasonable range of their long period average (LPA) valuations. PSU banks, it said, are trading at a premium to its LPA on a P/B basis. ONGC traded at a PE of 4.8 times, which still is at 40 per cent discount to its 10 year average of 7.9 times.

This is even as the stock is up 33 per cent in the last six months and about 48 per cent in the last one year. Tata Steel traded at a discount of 39 per cent at 12.4 times against a 10 year PE average of 20.4 times. This stock is up 19 per cent in the last six, and 15 per cent in the last one year. Dr.

Reddy’s Labs (down 26 per cent), BPCL (down 25 per cent), and Maruti Suzuki India (down 25 per cent) were a few other stocks trading a deep discount to their historical PE averages. Among private lenders, IndusInd Bank Ltd is trading at a 28 per cent discount, Kotak Mahindra Bank Ltd at 22 per cent discount and HDFC Bank at 17 per cent discount to it historical price to book values.

For Motilal Oswal Securities, Coal India, ITC Ltd, Bajaj Finance Ltd , Larsen & Toubro (L&T), HCL Technologies Ltd, Mahindra & Mahindra Ltd (M&M), Titan Company Ltd, Avenue Supermarts (DMart), Ultratech Cement, ONGC and Zomato Ltd are top largecap picks. Nomura India likes ICICI Bank Ltd, Reliance Industries Ltd (RIL), Mahindra & Mahindra Ltd (M&M), Larsen & Toubro Ltd (L&T) and Godrej Consumer Products Ltd (GCPL) in the largecap pack.

ICICI Bank, Maruti Suzuki India, State Bank of India and Bharti Airtel are some of the Axis Securities' top picks for January..