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Markets Look Attractive, May Fall A Bit More


It's been a long wait for investors who have been waiting on the sidelines looking to deploy money. Today they are getting stocks that have halved in value over the last 2-months and in some cases, they are getting stocks at one third the values.


Some stocks are now available at dividend yields of 8 to 9 per cent and price to book that we have not seen in a long time.

Look at the marquee names...

Reliance Industries, which was quoting at Rs 1600 in December, is now available at Rs 940, down almost 40 per cent. HDFC Bank, which was quoting at Rs 1,300 in December is now available at Rs 890. Every single stock has been belted and even bluechips have lost 40 to 50 per cent in the present carnage.

Nifty one year forward earnings, which were around the 22 mark, making stocks rather expensive are now trading at valuations of around 13 times, one year forward earnings, which is suddenly making stocks very attractive.

BofA Securities in a note said the market is now at fair value, with the headline forward P/E of 14.7 times, which has gone back to the 2014 level and is below the long-term average. In fact, the market has corrected another 10 per cent since that note, which means the p/e may now be around that 13 times levels.

Markets Look Attractive, May Fall A Bit More

It is always difficult to predict the bottoms for the market. Hence, it is advisable to buy a little in small quantities at regular intervals. This way, one would be able to make decent returns over a longer time frame.

It's also important that investors at this stage, should not be stopping their Systematic Investment Plans or SIPs of mutual funds. It's in fact time to increase your asset allocation to stocks.

Collective action from central banks likely

There is likely to be a flood of money from central banks across the globe. Already several countries including the US and the EU have announced easing programmes, which should lead to solid liquidity into the system.

Once the coronavirus infections abate, this money is likely to find its way into stocks and a stock rally would most probably be likely. However, investors would have to be a lot patient and wait for the right time. There is no point in selling stocks now at distressed valuations. Investors who are buying stocks now, need to keep a time frame of at least 2-3 years to make decent money.

A few months ago, we had been constantly writing that the stock markets were overvalued. At this time, we feel that they are slightly undervalued, though a 5 per cent correction from here, would make stocks super attractive.

Stocks that you should buy

If the country sees economic growth stalling, there would be many companies that languish. Hence, it would be better to buy into the strong set of index stocks, that is stocks from the Sensex and Nifty. Stocks like HDFC, HDFC Bank, Larsen and Toubro, and some other marquee names may not be a bad bet at all.

Read more about: stock market
Story first published: Thursday, March 19, 2020, 9:01 [IST]
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