Reliance Industries shares trade at 40% premium over historical average; ONCG, Tata Steel at steep discounts

Reliance Industries, Divi's Labs, Grasim Industries, Nestle India and Britannia Industries are a handful of Nifty stocks, which are trading at huge premiums over their long-term averages. Price targets of three of these five stocks suggest limited upside potential ahead.

ONCG, Tata Steel, Coal India and Apollo Hospitals, on the flip side, are among more than half of Nifty constituents that trade at steep discounts to their historical averages. Many of these stocks have price targets which suggest up to 26 per cent potential upside ahead.

Among Nifty constituents, Reliance Industries at 21.6 times trailing 12-month EPS trades at a 40 per cent premium over its 10-year average PE multiple of 15.4 times. Similar is the case with Divi's Labs, which at 43.3 times trades at a 40 per cent premium over its 10-year average PE of 31 times.

Yet, the average target price of Rs 2,896 on Reliance Industries, based on publicly available data with Trendlyne, suggests a 25 per cent potential upside ahead for the stock. For Divi's Labs, the average price target of Rs 3,222 suggests a 11 per cent upside ahead.

Data showed Grasim Industries trades at 27 per cent premium, Nestle India 19 per cent premium and Britannia Industries 18 per cent premium over their historical averages. Grasim and Britannia's average price targets suggest 7-8 per cent potential upsides while Nestle India's price target sugests no upside ahead.

ONGC at 3 times is trailing 12-month EPS trades at 64 per cent discount to its 10-year average of 8.3 times. This stock has an average price target of Rs 179.75, with an upside potential of 14 per cent.

Tata Steel at 9.4 times trades at 52 per cent discount to its long-term average of 19.4 times. The target price for this stock at Rs 113 suggests 7 per cent potential upside.

Coal India (44 per cent), Apollo Hospitals (33 percent) and Eicher Motors (31 per cent) are three other stocks trading at huge discounts to their respective historical averages. Coal India's price target suggests 18 per cent potential upside, Eicher's suggests 25 per cent upside while that of Apollo Hospitals suggest 26 per cent potential upside ahead.

Meanwhile, the benchmark Nifty is trading at a 12-month forward PE ratio of 17.8 times, below its LPA of 19.9 times – at an 11 per cent discount. Motilal Oswal Financial Services expects Nifty earnings may grow 14 per cent YoY in the March quarter. This brokerage likes ICICI Bank, ITC, L&T, Mahindra & Mahindra (M&M), Infosys, Ultratech and ONGC among large cap names.

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