5 stocks to buy at a discount to historical averages

Stocks at low p/e compared to historical averages

name Current p/e Historical P/E Discount
CGSB 3.1 8.9 -65%
JSW Steel 7.5 11.9 -37%
ICC 15.5 25.2 -38%
Tata Steel 6.6 12.6 -48%
Coal India 5.3 11.9 -56

Source: Motilal Oswal, bulls and bears report

Why are stocks trading at such high discounts?

Why are stocks trading at such high discounts?

For starters, most stocks that trade at a significant discount are mining and metals stocks. It must be understood that these sets of stocks have seen a phenomenal increase in the prices of their products, which leads to higher profitability. According to reports released a few days ago, domestic steelmakers have raised the prices of Hot Rolled Coil (HRC) and TMT bars up to Rs 5,000 per ton as supply is affected by the ongoing dispute between the Russia and Ukraine.

After the price review, one ton of HRC will cost around Rs 66,000, while buyers will get TMT bars for around Rs 65,000 per ton. Higher prices for steel products would continue to benefit steel companies, although it must be admitted that coking coal prices have also increased.

Are these stocks worth buying now?

Are these stocks worth buying now?

Some of the stocks like Coal India can be bought for their strong dividend yields. In fact, even though the price has gone up, the stock can still yield a dividend yield of close to 10%. As for the others, geopolitical tensions would keep prices higher for longer. In reality, the steel industry is a cyclical industry and right now it seems to be at the top of the cycle because economic growth around the world has been fantastic. We are unlikely to see the stock prices of some of these companies fall dramatically in the days ahead. ITC is a good stock to buy as it is a diversified game and offers a dividend yield of around 5%.

Market volatility worries investors

Market volatility worries investors

At present, recommending stocks also carries risks, given the volatile nature of the Indian markets.

“In the near term, market weakness is likely to continue as the Russian-Ukrainian conflict has led to global risk aversion. Foreign portfolio investors continue to remain net sellers in India as sentiment risk aversion and the geopolitical situation added to fears of inflation, higher bond yields and rising global rates.

From India’s perspective, a sharp spike in crude oil prices (Brent above USD 100/barrel) poses major risks on the external balance front and can play spoilsport with the assumptions made in the Union budget for FY23. For now, the sanctions imposed on Russia have excluded the oil trade. Although it is difficult to predict the end of the conflict in Ukraine, the rise in crude oil prices, if sustained for a high duration, may lead to higher inflation, current account deficit, bond yields and interest rates in India and thus have an impact on macroeconomic stability,” Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial Services Ltd.

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