Nifty stocks such as Grasim Industries Ltd, Tech Mahindra Ltd (TechM), Bajaj Auto Ltd, Divis Lab and HCL Technologies Ltd are now trading at PE levels, which are at strong premiums over their historical levels. On the other hand, Dr Reddy's Laboratories Ltd, Apollo Hospitals Enterprise Ltd, Maruti Suzuki India Ltd, Tata Steel Ltd and Coal India Ltd are among index constituents trading at deep discounts, data showed.
In the case of Grasim Industries, the stock trades at a PE of 27.8 times, which is at a 94 per cent premium over its 10-year average PE of 14.4 times. As per publicly available data with Trendlyne, the stock is a consensus 'Buy', based on 11 analyst views.
Tech Mahindra trades at 31.2 times against a 10-year average of 17.9 times, a premium of 74 per cent. TechM's margins are beginning to recover from unsustainably low levels observed in FY24, Axis Securities said while having the stock among its preferred tier I IT picks. Bajaj Auto also trades at 74 per cent premium. Among the two-wheeler players, InCred Equities prefers Bajaj Auto over Eicher Motors and TVS Motor Company.
Divi's Lab at 59.9 PE trades at 67 per cent premium over its 10-year average of 36 times. Divis Labs has a consensus 'Hold' rating, based on 26 analyst views. This is against Nifty, which trades at 24 times on a trailing 12-month basis, a 7 per cent premium over its LPA of 22.5 times. On a forward one-year basis, the 50-pack index is trading at 21.1 times, marginally above its long-term average of of 20.4 times, data compiled by MOFSL suggested.
On the flipside, Dr Reddy’s Labs at 19.1 times is trading at 25 per cent discount to its 10-year average PE of 25.4 times.
"Although visibility on FY27 product launches will improve over time, it is prudent to focus on investments in companies with lower product concentration risks and more attractive valuations. By FY27, Dr Reddy's Labs product concentration risk is expected to decrease to around 10 per cent of Ebitda, and it will trade at a P/E ratio of 21 times on total EPS, compared to 27-28 times for Lupin, Zydus and Cipla," JM Financial said.
Apollo Hospitals at 65.6 times trade at 20 per cent discount to its long-term average of 82.1 times.
Maruti Suzuki India trades at 20 per cent discount.
Tata Steel trades at 18 per cent discount while Coal India trades at 17 per cent discount to 10-year averages.
"We are cutting Coal India's volume by 1 per cent YoY each in FY25/FY26 to 784mt/823mt to factor in weakness in volume until August 2024. This along with muted prices compel us to reduce FY25E/26 Ebitda estimates by 4-4.5 per cent; yielding a lower target price of Rs 542 (earlier Rs 567). We are recommending booking profits on each rise," Nuvama said.
On Tata Steel Julius Baer said Tata Steel remains a strong player in India's steel industry, given its large scale, low-cost domestic operations, and focus on value- added steel (70 per cent of total deliveries). The recent SC judgement is expected to lead to marginal cost and one- time impact for arrear dues, it said while maintain a 'Reduce' on thr stock with a target price of Rs 160, based on 6 times FY26 EV/Ebitda.