Best Undervalued Stocks in India

Undervalued stocks are companies whose market values don't reflect their true value because of inefficiencies or temporary setbacks in the market. Investing in the best undervalued stocks in India today can be a great strategy for investors looking for long-term wealth creation.  With the help of this blog let’s understand which are the best undervalued stocks in India, how to invest in them and how to find undervalued stocks in India.              

What are Undervalued Stocks?

Undervalued stocks are company shares selling for less than their true value. This means that the stock's market price is lower than what it is worth based on factors like the company's earnings, dividends, future growth potential, and financial health. To find undervalued stocks, you must look closely at the company's financial statements, market position, and growth potential. 

Top Undervalued Stocks in India

Here are the top undervalued stocks in India:

Company Name

Industry

CMP

Market Cap

P/E

52 Week High

52 Week Low

Oil And Natural Gas CorporationGas & Petroleum₹ 272.25₹ 3,43,505 Cr7.07₹ 292.95₹ 155.40
Coal India LtdMining₹ 483.10₹ 2,94,547 Cr8.77₹ 527.40₹ 223.25
Varun Beverages LtdSoft Drinks₹1,612.70₹ 2,10,893 Cr97.45₹ 1,672₹ 755.00
ABB India LtdHeavy Electrical Equipments₹8,612.90₹ 1,81,054 Cr124.31₹ 9,149.95₹ 3,850.00
Aditya Birla Cap.NBFC - Diversified ₹ 244.88₹ 61,906.52 Cr18.56₹ 246.90₹ 155.00
Bank of IndiaBank₹ 122.96₹ 55,947.74 Cr8.52157.95₹  69.50

 

Disclaimer— All the information mentioned above is accurate as of 20th June 2024 and this information is for educational purposes only and shouldn't be considered financial advice. However, it is important to conduct research before making any investment decision in these stocks. 

 

Undervalued Stocks in India – Overview

The following is an overview of all the best-undervalued stocks in India mentioned above:

Oil And Natural Gas Corporation

Founded in 1956, ONGC is the largest producer of crude oil and natural gas in India, contributing around 70% of Indian domestic production. Crude oil is the raw material used by downstream companies like IOC, BPCL, and HPCL to produce petroleum products like Petrol, Diesel, Kerosene, Naphtha, and Cooking Gas-LPG.

  • Stock is trading at 1.00 times its book value
  • Stock is providing a good dividend yield of 4.10%.
  • The company has been maintaining a healthy dividend payout of 33.4%
  • The company has reported a standalone net profit of Rs 9,869.37 Crore in the quarter ended March 2024.

Coal India Ltd

Coal India Ltd was founded in 1975 and it is mainly engaged in mining and production of Coal and also operates Coal washeries. The major consumers of the company are the power and steel sectors. Consumers from other sectors include cement, fertilisers, brick kilns, and more.

  • The company is almost debt-free.
  • Stock is providing a good dividend yield of 5.01%.
  • The company has a good return on equity (ROE) track record: 3 Years ROE 51.8%
  • The company has been maintaining a healthy dividend payout of 51.8%

Varun Beverages Ltd

Varun Beverages Ltd founded in 1995, is an Indian multinational company that manufactures, bottles, and distributes beverages. It is the largest bottling company of PepsiCo's beverages in the world outside the United States and the largest in the AMESA sector.

  • The company has delivered good profit growth of 47.3% CAGR over the last 5 years
  • The company has a good return on equity (ROE) track record: 3 Years ROE 30.3%
  • The company's median sales growth has been 21.8% over the last 10 years
  • Stock is trading at 30.3 times its book value
  • The company might capitalise on the interest cost
  • Promoter holding fell over 3.49% over the last 3 years

ABB India Ltd

Incorporated in 1949, the Company undertakes projects in the fields of energy production, power transmission, transportation, process automation, and pollution control. ABB India's products include pollution control equipment, switch gears, and high-current rectifiers.

  • The company is almost debt-free.
  • The company has delivered good profit growth of 20.0% CAGR over the last 5 years
  • The company has been maintaining a healthy dividend payout of 24.4%
  • The stock is trading at 30.7 times its book value

Aditya Birla Cap

Aditya Birla Capital was incorporated in 2007, is a large-cap company and the holding company for the financial services businesses of the Aditya Birla Group, a universal financial solutions group catering to the diverse financial needs of its customers across their life stages.

  • The company has delivered good profit growth of 32.7% CAGR over the last 5 years
  • Though the company is reporting repeated profits, it is not paying out a dividend
  • The company has reported a consolidated net profit of Rs 1,288 Crore in the quarter ended March 2024
  • The company has a low-interest coverage ratio

Bank of India

Bank of India, incorporated in 1906, is a state-owned commercial bank headquartered in Mumbai. The bank provides a wide range of banking products and financial services to corporate and retail customers. The bank provides specialised services for businesses (dealing in foreign exchange), NRIs, merchant banking, etc. 

  • The bank has reported a consolidated net profit of Rs 1,574 Crore in the quarter ended March 2024
  • Stock is trading at 0.79 times its book value
  • The company has delivered good profit growth of 25.5% CAGR over the last 5 years
  • The company has maintained a healthy dividend payout of 21.4%

Reasons Why Stocks Become Undervalued

Here are the reasons why stocks become undervalued: 

Market Volatility

Significant drops in the overall market can result in the price drop of stocks. For example, when investors reevaluate their positions during a market correction, mid-cap, and small-cap companies can see substantial drops.

Performance Discrepancies

A company's stock price can suffer if the actual performance falls short of market or analyst expectations. Earnings reports or financial results that do not meet expectations are often viewed negatively by investors.

Economic Cycles

Some industries experience declining performance during certain quarters or periods. Stocks associated with these industries can see price declines although they have strong long-term prospects. 

Negative News

Negative economic, political, or social news can hurt stock prices. Hindenburg Research said Adani's stock prices fell significantly after publishing a critical report.

How to Invest in Undervalued Stocks in India?

You can invest in Undervalued Stocks in various ways and here are some of the strategies:

Direct Stock Picking

By direct stock picking you can start investing in undervalued stocks. Under this strategy, you can conduct thorough research and select companies trading below its intrinsic value. You need to carefully analyse the financial statements, and valuation metrics, and understand the company’s business model and market position.

Mutual Funds

You can invest in mutual funds that focus on value investing. To create a diverse portfolio of undervalued stocks, they combine the capital of multiple investors. 

Exchange Traded Funds (ETFs)

It is convenient to invest in an ETF that focuses on undervalued stocks. As with individual stocks, these funds track specific indices and offer diversification, lower costs, and ease of trading.

Conclusion
To sum up, investing in the best-undervalued stocks in India can be a wise decision for investors looking for long-term wealth creation. Investors can buy these shares at prices lower than their true value, leading to significant gains when the market corrects its inefficiencies. Investors can build a robust and diversified portfolio by carefully selecting undervalued stocks or investing in mutual funds and ETFs that focus on value investing. It is even easier to simplify this process by using a reliable stock market app, which provides real-time information, analysis tools, and alerts for potential investment opportunities.