3 Blue Chip Stocks To Buy After A 50% Fall In Their Price

Investment

oi-Sunil

By Sunil Fernandes

Published: Friday, September 25, 2015, 9:41 [IST]

Benchmark indices in the country have corrected almost 15 per cent since hitting lifetime highs in March this year. While select stocks from IT and pharma have been holding ground, other stocks from banking and autos have come crashing down. Here are a few blue chips that have been knocked down badly and are good bets at the current levels. The below three are good blue chip stocks to buy now.

Tata Motors

Shares in Tata Motors have slipped from levels of Rs 606 to Rs 301. The share price has almost halved with relentless selling being seen from all categories of investors.

The recent Volkswagen Diesel engine emission scandal has pushed the stock even lower. The one fear that marketmen have is that the slowing growth in China could affect Tata Motors' Jaguar LandRover sales, which accounts for almost 20 per cent of revenues. This has led to hammering of the stock.

Though China is slowing, to assume that there would be a hard landing of the country's economy would be foolhardy at the present stage. The government would do all it can to prop up the economy.

Recently, two brokerages ICICI Direct and Motilal Oswal, placed buy calls on Tata Motors. These brokerages see the FY 2017 EPS at around Rs 52-54. This means the stock is currently quoting at a p/e multiple slightly under 6. If Maruti can command a p/e of more than 30 times, there no reason why Tata Motors with a solid brand like Jaguar Land rover should languish at a p/e under 6 times. The stock looks good from a 2-3 year perspective.

NMDC

NMDC has fallen from highs of almost Rs 172 to the current levels of Rs 93. At a time when most companies are highly leveraged with huge debts on the books, it makes sense to buy companies that are cash rich and debt free. NMDC is not only debt free, but, has huge cash and bank balances on its books.

The recent fall in the share price can be largely attributed to the fall in commodity prices. A slowdown in Chinese growth has pushed commodity prices lower and this has hit NMDC, which mines iron ore. The business is highly profitable though.

The one good thing about NMDC is the huge dividend that it pays. In fact, the dividend yield on the stock itself is close to 9 per cent. This is much better than bank fixed deposit interest rates.

The stock is a good bet at the current levels of Rs 93. Commodity prices cannot fall a great deal from here.

Coromandel International

Recently, the stock of Coromandel International has slipped from Rs 340 to the current price of Rs 157. The stock has fallen largely on the back of monsoon worries, aggravated by delayed sowing, which impacted volumes.

Emkay Global recently, put a buy call on the stock as it sees a demand revival in complex fertilizers. The management expects capacity utilization to be around 80-85 per cent in the coming year. The sharp fall in the Coromandel Stock leaves enough room for appreciation. The stock is now trading at a p/e multiple of just 6.7 times, it's estimated EPS of Rs 23, making the stock attractive at the current levels.

All the above are good stocks to buy.

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