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Synopsis: Several Nifty 50 stocks, including ONGC, Tata Steel, and Dr Reddy's Labs, are trading at significant discounts to historical valuations, while others like Grasim Industries and Reliance Industries are trading at steep premiums.
Several Nifty 50 stocks are currently trading at significant discounts to their historical valuations. According to data compiled by Motilal Oswal Securities, ONGC, Tata Steel Ltd, Dr Reddy's Laboratories Ltd (DRL), Apollo Hospitals Enterprise Ltd, Maruti Suzuki India Ltd, and Coal India Ltd are among the stocks trading well below their historical price-to-earnings (PE) multiples.
Specifically, ONGC shares, with a prevailing PE of 5.1 times, are trading at a 31% discount to their 10-year average PE of 7.3 times. Dr Reddy’s Labs, with a PE of 18.9 times, trades at a 26% discount to its 10-year average of 25.6 times. Apollo Hospitals, at 60.1 times PE, is trading at a 26% discount to its historical average of 81.7 times. Maruti Suzuki India shares are available at a 22% discount, Coal India at a 19% discount, and Tata Steel at a 16% discount compared to their historical PE levels.
Conversely, several stocks are trading at steep premiums over their 10-year PE multiples. Grasim Industries, with a PE of 27 times, trades at a 93% premium over its 10-year average of 14 times. Reliance Industries (RIL) shares, at 25.6 times PE, are trading at a 65% premium over their long-term average PE of 15.6 times. Other stocks trading at significant premiums include Bajaj Auto (56% premium), Divis Labs (55% premium), and Adani Ports (55% premium).
Motilal Oswal Financial Services noted that India is experiencing a favorable economic period with excellent macros, robust corporate earnings, a focus on manufacturing, and infrastructure creation. However, it cautioned that sectors with overheated valuations, such as Industrials, Railways, Defense, and PSUs, might see a moderation in valuations before becoming attractive from a risk-reward perspective. The firm recommended large-cap stocks like ICICI Bank Ltd, ITC Ltd, HCL Technologies Ltd, Coal India Ltd, State Bank of India (SBI), Larsen & Toubro (L&T), and Mahindra & Mahindra (M&M) as favorable bets.
Disclaimer: This information is based on data compiled by Motilal Oswal Securities and is subject to change as market conditions evolve.
