In a market that is trading close to its peak, despite poor earnings, geopolitical tensions, and an unstable macro, it has become difficult for market expects to find value. International brokerage Jefferies noted 11 such stocks that still offer value, even though the brokerage said finding attractive value versus growth has become tough in non-financials.
The brokerage noted that the MSCI India ex-financial index trades at 26.4x 1-yr forward PE, while the MSCI India valuations have risen to 23.3x. The brokerage added that relative to EMs, it trades at 82 percent premium to EMs (compared to the ten-year average of 63 percent.
Among the 147 non-financial stocks under Jefferies' coverage that have been listed for over five years, nearly 39 percent are trading above 1-standard deviation of their 10-year average PE, while ~8 percent are trading at 2-standard deviations above.
Jefferies has identified a set of value opportunities from its coverage universe (ex-financials); these include a mix of absolute value picks and relative value bets. In either case, the brokerage restricted stocks with EV/EBITDA multiples below 18x. However, this is not a purely valuation screen.
"Our approach also incorporates stocks we fundamentally like and while also considered historical valuation range," added the brokerage.
From the value stocks list, Jefferies added three stocks to its model portfolio: Sagility India, Belrise Industries and Adani Energy Solutions.
Sagility is a fast-growing IT midcap company and Jefferies added that by trimming weight on Infosys, keeping IT still at an 'underweight' position. The change within the auto sector is made by replacing Eicher Motors with Belrise Industries, an auto-comp midcap, of which, the stock provides a strong growth outlook. Further, Jefferies added Adani Energy Solutions as a fast growing utility.
On the flip side, Nuvama Wealth Management was removed following the recent regulatory action on derivatives trading.
Overall, the 11 non-financial value buys as noted by Jefferies are:
- Adani Energy Solutions
- Adani Ports
- AWL Agri Business
- Birla Corporation
- Belrise Industries
- Bharti Airtel
- Finolex Cables
- InterGlobe Aviation
- M&M
- NTPC
- Sagility
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
