4 Stocks That Are The Cheapest From The Nifty Basket, Should You Buy?

Markets have been exceedingly volatile in the month of Feb, 2021, with the Sensex now back to pre-budget levels. Going forward too we expect the markets to continue to be so, given the forthcoming RBI policy and worries over the US Fed raising interest rates at a faster pace. It would be interesting to see where the markets are headed from here.

How we took the cheapest stocks from the Nifty?

We have considered the p/e ratio currently as compared to the historic p/e of the last 10 years average. If the average is less than the current p/e, it can be implied that these stocks are cheaper in terms of p/e.

It's important to note that other parameters have not been taken into consideration and only the price to earnings multiples have been considered for the purpose. Other methods of valuation or parameters like to to book or enterprise value have not been considered.

These 4 stocks are now the cheapest when compared to historical averages

	Current p/e	10-year average
JSW Steel	7.5	12
NTPC	8.2	11.2
Tata Steel	5.9	12.8
Hindalco	8.7	9.2

 

Should you buy the stocks of Tata Steel and JSW steel?

Steel stocks have seen their valuations dip, because their results have been outstanding. Tata Steel reported a superb set of quarterly numbers. The net profits at the company more than doubled to Rs 9598 crores. JSW Steel also saw reported a 69.20 per cent year-on-year increase in consolidated net profit at Rs 4,516 crore for the December quarter compared with Rs 2,669 crore posted in the corresponding quarter last year. The total income at the company too jumped by almost 73%.

Most of the steel companies have been doing well, thanks to a surge in commodity prices. We believe with there being no signs of prices falling, the up trend would continue. This has led to sharp expansion in EPS and lower p/e for some of these companies.

However, the cycle for metals can turn. Right now, these companies are in a sweet spot. We would recommend buying the stock of Tata Steel as the company is also fast deleveraging. It is paying back and reducing its debt.

Markets overall look highly priced

One can buy selectively into stocks, but, the markets seem a little over priced at the moment. Stocks are trading at premium to historic valuations and hence it is advisable to only buy the dips. The few stocks from the Nifty that are trading at a discount have been highlighted and there are a few pharma companies also that are trading at a discount to historical averages. With interest rates across the world set to rise, we believe that the Indian markets would remain exceedingly volatile and hence only buy on dips.

Disclaimer

Investing in equities is risky and investors must therefore understand the risk. The author and Greynium Information Technologies Pvt Ltd would not be responsible for any losses caused based on the article. The author and his family do not hold shares in any of the companies mentioned above.