Infosys, Reliance Industries & ONGC attractive buys despite market highs

Written by Jash Kriplani | Mumbai | Updated: Sep 4 2014, 09:59am hrs
Even as markets are at all-time highs, blue-chips such as Dr Reddys, Axis Bank, Bank of Baroda, Lupin, ONGC, RIL, BPCL and Infosys seem attractively priced as they trade below their long-term average valuations.

Experts feel while these stocks may see some headwinds in the near-term, current valuations make them an attractive buy. With the oil subsidy burden reducing on ONGC, the stock could see further upside. Infosys could see an uptick with the sector seeing a pick up in demand. In addition, the IT major could benefit from the product-based approach of the new CEO. However, in the near-term, the stock could face some headwinds due to appreciation in the Rupee, said Vinay Khattar, head (research),

Edelweiss Capital Markets.

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Certain Nifty stocks are trading at more than 70% discount to their long-term average valuations. The oil & gas exploration and production company Cairn India is currently trading at one-year trailing p/e of 5.18, which is 72.69% below its long-term average p/e of 18.95. The Gurgaon-based company saw its earnings grow 3% for the year-ended March 31, 2014.

Dr Reddys Laboratory, which saw the net profit grow 28.20% for the year-ended March 31, 2014, is currently trading at 56.15% discount to its long-term average valuations.

Among banking stocks, Bank of Baroda and Axis Bank are trading at 15.41% and 17.16% discounts, respectively, to their long-term average price to book valuations. While Axis Bank saw it net profit for the year-ended March 31, 2014, grow 20.50%, Bank of Baroda saw its earnings grow 4.10% during the same period.

Experts expect earnings per share (EPS) growth for Nifty in FY15 to be at 16%. Bloomberg consensus forecasts for the Nifty suggest EPS growth of c16% in FY15 and c17% in FY16 post an insipid c9% in FY14 and have exhibited positive momentum in past three months, Barclays said in a report. According to Khattar, with markets hitting new highs every other day, large-caps are expected to drive the market rally.