Stocks To Buy: 2 Nifty Stocks At 52-Weeks Lows, Opportunity Or A Trap?

Housing Development Finance Corporation

The stock has hit a new 52-week low of Rs 2026. The shares were last seen trading at Rs 2058. Now, we all know that a merger between HDFC and HDFC Bank is on the cards and individuals will receive 42 shares of HDFC Bank if they have 25 share of HDFC. Our calculations show that if you buy 25 shares of HDFC now, you spend about Rs 51,450 and in turn you would get 42 shares of HDFC Bank, which is worth Rs 54,432 at the current market price of Rs 1296. So, it makes sense to but HDFC and not HDFC Bank. From a fundamentals perspective, HDFC's huge holdings in HDFC Bank, HDFC Mutual Fund, HDFC Life etc., itself is worth Rs 1000 and more per share. This means the core business is valued at just Rs 1000, which is slightly more than 12 times its earnings. That is extremely cheap for a Nifty company. 

Why has the HDFC Stock crashed to 52-week lows?

HDFC was one stock in which Foreign Portfolio Investors owned massive amounts. They are now off loading shares as interest rates across the globe are rising. HDFC is a very liquid counter, which is why we are seeing some large scale selling in the shares. For the stock to recover there has to be limited unwinding by Foreign Portfolio Investors or else we may see a further dip in prices. Our own belief is that fundamentally nothing wrong with the stock. A few issues after the merger with HDFC Bank will have to be resolved. Also, the authorities have to give approval for the merger. Hard to say what could happen with the merger. However, if you look at how things stand now, we believe that the stock is under valued and represents a good opportunity to buy at the current levels.

Tata Steel

This is another stock that hit its 52-week low of Rs 854, after which it saw a recovery. As things stands and looking at FY 2021-22 numbers, they were extremely good. Markets however, look to the future and not the past. In any case let's tell you the numbers of the past. Based on the past (FY 2021-22) EPS, the stock trades at a p/e of just 4 times and a dividend yield of 4.5%. The shares are currently available with a stock split of 1:10. The company has also repaid significant debt in 2021-22. All these things are a big positive for Tata Steel going ahead and are reasons to recommend buying the stock

Tata Steel: What lies ahead?

The reason why the stock has plunged to a 52-week low is that going ahead, things look a little tough in FY 2022-23. Steel prices have already softened and the government increasing export duty on steel has not helped. Apart from this, there are fears that rising interest rates could have a cascading impact on the economy and hence steel prices. Tata Steel had a very good few years, when steel prices were good. Things are looking tough at the moment and its hard to say, which direction things would move. Having said that the stock has corrected significantly from 52-week highs. We believe that should you get the stock around the Rs 850 levels, it would be worth buying. There are risks, given the high beta of steel stocks, but, that is the nature of stock markets.