Markets have recovered significantly from their recent lows and in fact, at these levels, the Nifty trades at 9 to 10 per cent premium over historic valuations.
Here are a few large cap ideas taken from Motilal Oswal's latest report titled "Bulls and Bears".
Large-cap stock ideas
1) ICICI Bank, 2) SBI Life, 3) Divis Labs, 4) Titan, 5) M&M, 6) HUL, 7) Infosys
8) Bharti Airtel, 9) HCL Tech, 10) Dabur
Mid-cap stock ideas
1) AU Finance 2) TCPL 3) IndiaMart 4) IEX 5) IPCA 6) Alkem 7) LT Infotech 8) Motherson Sumi 9) ICICI Securities 10) Teamlease.
Markets maybe over priced
The Nifty and the Sensex are trading a p/e levels that are above historic valuations, which reduces the risk to reward ratio.
"The Nifty trades at 12-month forward P/E of 20.5x, 9% premium to its long-period average. The Nifty's P/B of 2.6x is at its historical average. The Nifty's 12-month trailing P/E of 24.2x is trading at 23% premium to its long-period average of 19.8x. At 2.8x, the Nifty's 12-month trailing P/B is at its historical average," Motilal Oswal's Bulls & Bears Valuation Handbook states.
Companies trading at significant premium and discount
According to the report, companies trading at significant premium to historical averages include: Reliance Industries (+78%), HCL Tech (+74%), Titan (+61%), Asian Paints (+59%) and Infosys (+55%). Companies trading at significant discount to historical averages: Coal India (-53%), NTPC (-49%), IOCL (-49%), ONGC (-48%) and Bharti Infratel (- 48%).