5 Nifty Stocks To Buy That Trade At Discount To Long-Term Averages

Generally, stocks that trade at a hefty premiums to long term averages could be bought into, unless there are some fundamental reasons for such a discount. However, one needs to dig deeper and see whether there are reasons to buy some of these stocks Coal India that are undervalued. We have picked some stocks from the Bulls and Bears Report of Motilal Oswal.

Stocks that are trading at discount to long-term averages

Name	Current p/e	10-year average	Premium/discount
Coal India	5.7	11.7	-52
JSW Steel	7.5	11.9	-37
Apollo Hospitals	49.9	72.7	-31
Tata Steel	5.3	12.8	-59
ONGC	2.6	8.7	-70

The above is taken from the report of Motilal Oswal. Some of the stocks like ONGC and Coal India are trading at very steep discount to long-term averages.

Tata Steel: A good discount stock to buy

Tata Steel is trading at a huge discount of nearly 59% to long term averages, which is one of the big reasons to buy the stock. While, the p/e shown above as per the Bulls and Bears report is 5.3, the stock has actually fallen taking the p/e to around 4.5 times. One of the top reasons to buy the stock of Tata Steel apart from a low p/e is that the stock is available with a dividend of Rs 51 per share. This translates into a dividend yield of more than 4%. Apart from this the other reason to buy the stock is that there is a stock split going forward and the company is also repaying debt. All of these makes the stock an attractive bargain at the current levels. Yes, there are risks associated with slowdown in the economy, if steel prices fall. However, on the more longer term the potential looks strong.

Is it a good time to buy JSW Steel and ONGC?

As far as JSW Steel is concerned the prospects are similar to that of Tata Steel. If metal prices move higher, the company could be one of the beneficiaries. In fact, the stock is trading at a steep discount of 37% to long-term averages. Just imagine you are getting the shares at a p/e of less than 3 times, thanks to surging crude prices. Now ONGC stock is also a good buy, as long as crude oil prices stay elevated. ONGC being an oil and gas exploration company is likely to benefit in the coming quarters from elevated crude prices. However, if interest rates rise fast and economic growth slows, crude is likely to sell-off. In such an instance a company like ONGC is likely to be impacted.

Apollo Hospitals: Valuations look steep

There are a few stocks from the Nifty, where valuations have been extremely steep. One of them is Apollo Hospitals and the other is Asian Paints. We would not recommend buying the stock of Apollo Hospitals as we believe that the price to earnings multiple for the stock is rather hefty. Yes, the stock has fallen from levels of Rs 5950 to Rs 3590, but still remains expensive. Should the stock dip to around that Rs 2800 levels, it could become an attractive stock to buy. Overall, all of these stocks are likely to move in tandem with the markets. The two steel stocks mentioned above can be extremely volatile and hence caution is also warranted.