One-Third of NSE 500 Stocks Now Cheaper than Pre-Covid Valuation: Experts Weigh In
Market Correction: A Buying Opportunity or a Sign of Worry?
Mumbai: Amidst the ongoing market correction, a significant segment of the NSE 500 stocks have dipped below their pre-Covid valuations, with about a third of them now trading cheaper than they were in March 2020. This phenomenon has caught the attention of market experts, who are weighing in on the implications for investors.
What’s behind the Correction?
The sharp market correction since October 1 has led to a scenario where several blue-chip companies are trading 10-60% below their March 2020 levels. Experts attribute this to a combination of factors, including weak earnings, sector-specific challenges, and internal transitions.
HDFC Bank, Bharti Airtel, ICICI Bank, and More: Who’s Who in the ‘Cheaper-than-Covid’ Club
Some of the prominent stocks that have fallen below their pre-Covid valuation include HDFC Bank, Bharti Airtel, ICICI Bank, State Bank of India (SBI), Hindustan Unilever (HUL), Bajaj Finance, Kotak Mahindra Bank, Maruti Suzuki, Axis Bank, Bajaj Finserv, Avenue Supermarts, Coal India, and Asian Paints. [1]
What’s the Impact on Sectors and Stocks?
The impact is more pronounced in sectors and stocks where earnings growth remains below the long-term average, with subdued signs of recovery. For instance, the paint industry is grappling with intensified competition, while Bajaj Finance is facing valuation pressures due to concerns over its exposure to unsecured retail lending.
Experts’ Take: A Buying Opportunity or a Sign of Worry?
While some experts believe that the current valuations offer a buying opportunity for investors, others are cautioning against acting impulsively. Vinod Nair, Head of Research at Geojit Financial Services, opines that certain segments do offer value buy strategies as they are trading below their long-term industry averages, especially large-cap stocks.
Is the Nifty Adapting to New Realities?
The benchmark Nifty has surged 103% since March 2020, but its PE ratio has become 8% cheaper, declining from 21.8 in March 2020 to 20 currently. In contrast, the Nifty Midcap 150 index has become 28% more expensive following a 200% rally since March 2020.
Where do We Go from Here?
As the market navigates these unprecedented challenges, investors would do well to weigh the potential opportunities against the risks. According to Sahil Shah, MD at Equirus, "The lending sector has been grappling with margin compression amid sluggish deposit growth. However, as lending growth rates have now converged with deposit growth rates, and with deposits poised to expand at a healthier pace, there is a strong likelihood that lender valuations could see a meaningful recovery in the near future."
Conclusion: One-Third of NSE 500 Stocks Now Cheaper than Pre-Covid Valuation
As the market continues to evolve, investors would be well-advised to keep a close eye on the developments in these sectors and stocks. While some may view the current valuations as a buying opportunity, others may caution against acting impulsively. Ultimately, it is essential to approach these investments with a clear head and a well-thought-out strategy.
[References:]
[1] This list includes HDFC Bank, Bharti Airtel, ICICI Bank, State Bank of India (SBI), Hindustan Unilever (HUL), Bajaj Finance, Kotak Mahindra Bank, Maruti Suzuki, Axis Bank, Bajaj Finserv, Avenue Supermarts, Coal India, and Asian Paints.
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