ONGC, Tata Steel, BPCL, UPL: Nifty stocks that trade at huge discount to historical valuation multiples

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ONGC, Tata Steel, BPCL, UPL: Nifty stocks that trade at huge discount to historical valuation multiples

In the case of ONGC, the stock traded at a PE of 4.5 times against a 10-year average of 8 times. At Tuesday's close, the scrip needed a 56 per cent rally to revisit its all-time high of Rs 314.67 hit in June 2014.

For Tata group stock Tata Steel, PE at 13 times is at 36 per cent discount to its 10-year average of 20.1 times.

Even as the NSE benchmark Nifty is hitting its record high levels each passing day, nearly half of index constituents including Oil and Natural Gas Corporation Ltd (ONGC), Tata Steel Ltd, BPCL Ltd, Dr Reddy's Labs and UPL Ltd are commanding valuations that are at discount to historical averages. Nifty itself is trading at a 12-month forward P/E ratio of 18.4 times, which is at a 9 per cent discount to its long-period average.

In the case of ONGC, the stock traded at a PE of 4.5 times against a 10-year average of 8 times. At Tuesday's close, the scrip needed a 56 per cent rally to revisit its all-time high of Rs 314.67 hit in June 2014.

For Tata group stock Tata Steel, PE at 13 times is at 36 per cent discount to its 10-year average of 20.1 times. At Tuesday's close of Rs 131.70, the stock needed 16.52 per cent rally to revisit its record high level of Rs 153.46 hit in August 2021. BPCL required 17 per cent jump to revisit its October 2017 high of Rs 550. This stock traded at a PE of 6.1 times against a 10-year average of 9 times, a discount of 32 times.

Within Nifty, Maruti and Eicher Motors traded at discounts of 23 per cent and 22 per cent, respectively, over their 10-year PE average. In the case of banks, IndusInd Bank (34 per cent discount), HDFC Bank (24 per cent) and Axis Bank (7 per cent) traded at up to 34 per cent discount to their 10-year average price-to-book ratio.

Ultratech Cement (6 per cent discount) from cement sector, ITC (1 per cent discount) from FMCG and Dr Reddy's (26 per cent), Apollo Hospitals (16 per cent), Cipla (15 per cent) and Sun Pharma (8 per cent) from healthcare sector are trading at discount to their historical averages.

Motilal Oswal Securities like ICICI Bank, Larsen & Toubro Ltd (L&T), ITC, Bajaj Finance, Titan Company, Avenue Ultratech Cement, ONGC and Zomato among lagecap stocks. It also likes HCL Technologies and Mahindra & Mahindra (M&M).

B&K Secruities in a note said "The ITC Moment for some of the larger banks whose stock have not performed may not be far, as foreign flows have picked up and relative valuations are very compelling.

Kotak Securities said it is possible that mega-caps may now see more interest from the market, specifically FPIs, given their reasonable valuations and lower worries about a sub-optimal outcome (no decisive mandate) in the general elections.

"We note that the mega-caps and financial stocks are reasonably valued compared to their historical valuations and future prospects, the consumption and outsourcing stocks are fully-to-richly valued based on historical valuations and large negative changes to their operating environments and business models (more relevant for consumption stocks) and investment, mid-caps and small-caps are richly-to-absurdly valued compared to their rather questionable business models and non-sustainable earnings," it said.