- India’s benchmark equity index Sensex has lost 33% since the start of the year due to the carnage caused by the spread of Covid-19 novel coronavirus pandemic across the world.
- ICICI Direct Research has shortlisted a set of ten stocks where the price-to-earnings ratio is less than 10.
- Price-to-earnings ratio is measure to value stocks and a multiple of less than ten could be a good time to buy these stocks.
Broking firm ICICI Direct has put together a list of ten stocks that are currently trading at multiple of less than 10 compared to their potential earnings a year down the line i.e. you pay less than ten times the value of the company’s earnings per share, and that is considered to be cheap. “This clearly does not indicate a bottom but certainly indicates good entry points. Hence, investors can choose to stagger or invest lumpsum depending upon one risk appetite and time horizon,” the report added a note of caution.
These are the ten stocks with a price-to-earnings ratio of less than 10, according to ICICI Direct Research.
| Hero MotoCorp | KSB |
| Wipro | BEL |
| Tech Mahindra | Gujarat Pipavav |
| Mahanagar Gas | Kewal Kiran Clothing |
| Heidelberg Cement | TV Today |
The following are the prospects for some of the blue-chip stocks in this list.
Hero Motocorp
Every second motorcycle sold in India is made by Hero Motocorp. However, the stock has lost over 32% of its value in the last three months.
Going forward, people’s purchasing power is likely to be hit in the aftermath of the coronavirus pandemic. But the company will be forced to increase prices of its products by over 10%, according to ICICI Direct, capping the potential sales growth even on the road to recovery.
But the broking firm recommends that investors buy Hero Moto shares because it has consistently given a 25% return on capital employed and an attractive dividend yield of about 5%.
Wipro
One of India's top five tech services company has lost nearly a quarter of its share value in the last three months. “In the near term, the company may face revenue pressure due to exposure to affected verticals like energy vertical, lockdown, pricing pressure and slowdown in discretionary spend,” the report said about Wipro, which makes 31% of its revenue from its clients in banking and financial services.
However, there is likely to be a greater thrust of digitisation and automation in the post-coronavirus world and that could throw up a lot of opportunities for companies like Wipro, Infosys, and TCS. The advantage with buying the Wipro stock is beaten down a lot more than its peers and therefore has more headroom for gains.
| Stock | Last 3 months |
| TCS | -22.30% |
| Infosys | -19% |
| HCL Tech | -29.35% |
| Wipro | -27.44% |
| Tech Mahindra | -34.04% |
Similar gains are likely in Tech Mahindra as well, which has also lost over 34% in the last three months.
“The company's leadership in telecom vertical will make it a key beneficiary of vendor consolidation in the segment and 5G opportunities,” the report said about Tech Mahindra.
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