The market is melting like lava, with stocks plunging into the red for the sixth consecutive trading session on Monday, 7th October 2024. The third biggest crash of the year hit on 3rd October, as the BSE Sensex nosedived 1,769 points, or 2%, closing at 82,497. Stocks with high valuations have taken the hardest hit. One of the key drivers of this bearish sentiment is the exit of Foreign Portfolio Investors (FPIs), who are pulling money from the Indian market due to extremely high valuations. Now, all eyes are on low PE stocks—those offering attractive valuations or trading below their intrinsic value. For so long, we’ve been advocating for focusing on value rather than chasing short-term gains. And as the market teaches, it rewards disciplined investors who stay patient during turbulent times.
But the question looms: with the Sensex plummeting 5,100 points in just 6 days and concerns over China’s economic activity sparking fears of further declines, should we sell and leave with whatever we can, or does this present a prime opportunity to make a new entry? Let’s dive in!
Also read: Stocks with high PE ratios – Can We Call This A Stock Market Bubble?
Does a Market Crash Create an Ideal Entry Point for Strong Low PE Stocks?
From a value investor’s perspective, a market crash can be one of the most opportune times to enter the market, especially for strong low PE stocks. Even fundamentally sound companies with robust financials and solid growth potential during a crash often see their stock prices decline due to broad market sell-offs. This can lead to temporarily low P/E ratios, creating a significant disconnect between the stock’s price and its intrinsic value.
For a value investor, the focus is on identifying strong stocks—companies with proven business models, stable earnings, and the ability to weather downturns—that are trading at discounted prices. These stocks, despite market panic, are likely to recover and potentially outperform as the market stabilizes. A crash allows investors to acquire shares of these companies at a fraction of their true worth, setting the stage for long-term gains when the market rebounds.
However, it’s crucial to conduct thorough research and ensure that these low PE stocks are indeed strong businesses and not in decline for fundamental reasons. Thus, while a market crash can present ideal entry points, value investors must remain selective and patient, focusing on quality stocks with the potential to thrive once the market turns.
Also read: Reliance Power Fundamental Analysis: Growth Potential and Risks
Factors Contributing to the Market Fall
Data Source: The Economic Times
Foreign Investors Moving to China: Foreign investors are pulling out of Indian equities and investing in China, attracted by lower valuations and stimulus-driven growth prospects in the Chinese mainland market. (The Economic Times)
Valuation Disparity
-Nifty is trading at 21.5x forward earnings, which is above its historical average.
-In contrast, MSCI China is trading at 10.8x forward earnings, making it a more attractive option.
Impact on Indian Markets
The Indian stock market has felt the impact of the China factor. On 3rd October 2024, the Sensex dropped 1,769 points, wiping out Rs 10 lakh crore in market capitalisation. Investors are increasingly worried that funds could continue flowing out of Indian stocks into China as Chinese equities rally.
Will China’s Stimulus Have a Long-Term Impact?
According to Viram Shah, CEO of Vested Finance, the long-term benefits of China’s stimulus measures depend on how the Chinese government handles deeper structural issues in their economy. While the lower valuations may bring in short-term capital, it’s still unclear whether this will be sustained in the long run. (Business Today).
Now, let’s discuss fundamentally strong low PE stocks that are currently trading at a discount, offering attractive long-term opportunities.
Best Low PE stocks
There’s only one intelligent form of investing: figuring out what something’s worth and see if you can buy it at or below that price. It’s all about value.” Howard Marks
Value investing is all about investing in companies with solid fundamentals and whose share price is below its intrinsic value. That is the stocks with low PE ratios. Let’s explore some of the best low PE stocks: One Global Service Provider Ltd, Coal India Ltd, Nava Ltd, Fineotex Chemical Ltd, Tata Elxsi Ltd, KNR Constructions Ltd, 20 Microns Ltd, Ind-Swift Laboratories Ltd, Great Eastern Shipping Company Ltd, Indraprastha Medical Corporation Ltd, CMS Info Systems Ltd.
Let’s Explore some of the Best Low PE stocks
One Global Service Provider Ltd
52 Week Low: ₹36.5 | 52 Week High: ₹185 | Current Price: ₹158
One Global Service Provider Ltd. was incorporated in 1992 and operates in the Healthcare sector. It is a small-cap company with a market capitalization of Rs 115.81 crore. The company’s key revenue segments for the year ending March 31, 2023, include Diagnostic Services and Healthcare Services.
Key financial metrics for One Global Service Provider Ltd. are as follows:
-P/E Ratio: 14.30
-Price/Sales Ratio: 0.88
-Price to Book Ratio: 8.04
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Nava Ltd
52 Week Low: ₹374 | 52 Week High: ₹1,348 | Current Price: ₹1,003
NAVA Ltd., incorporated in 1972, operates in the Diversified sector. It is a mid-cap company with a market capitalization of Rs 14,564.48 crore. For the year ending March 31, 2024, its key products and revenue segments include Ferro Alloys, Power, Sale of Services, Other Operating Revenue, Scrap, and Export Incentives.
Key financial metrics for NAVA Ltd. are:
-P/E Ratio: 14.03
-Price/Sales Ratio: 1.85
-Price to Book Ratio: 1.75
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Coal India Ltd
52 Week Low: ₹283.05 | 52 Week High: ₹543.55 | Current Price: ₹480
Coal India Ltd., incorporated in 1973, operates in the mining sector and is a large company with a market capitalization of Rs 296,088.28 crore. For the year ending March 31, 2024, its key products and revenue segments include Coal and Other Operating Revenue.
Key financial metrics for Coal India Ltd. are:
-P/E Ratio: 8.10
-Price/Sales Ratio: 1.88
-Price to Book Ratio: 3.54
Also read: Coal India Share Analysis: Key Insights
KNR Constructions Ltd
52 Week Low: ₹236.75 | 52 Week High: ₹415.40 | Current Price: ₹310
KNR Constructions Ltd., incorporated in 1995, operates in the Infrastructure sector. It is a mid-cap company with a market capitalization of Rs 8,722.49 crore. For the year ending March 31, 2023, its key revenue segments include Income from Contracts and Other Operating Revenue.
Key financial metrics for KNR Constructions Ltd. are:
-P/E Ratio: 10.67
-Price/Sales Ratio: 1.56
-Price to Book Ratio: 2.49
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Indraprastha Medical Corporation Ltd
52 Week Low: ₹149 | 52 Week High: ₹484 | Current Price: ₹401
Indraprastha Medical Corporation Ltd., incorporated in 1988, operates in the Hospitals & Allied Services sector. It is a small-cap company with a market capitalization of Rs 3,638.50 crore. For the year ending March 31, 2023, its key revenue segments include Hospital Services, Licence Fees, Other Operating Revenue, and Miscellaneous Income.
Key financial metrics for Indraprastha Medical Corporation Ltd. are:
-P/E Ratio: 26.80
-Price/Sales Ratio: 1.26
-Price to Book Ratio: 7.62
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Let’s Wrap it Up!
The greatest investors in the world have often advocated for value investing. As David Rolfe said, “Value never dies. Never. Price is what you pay, value is what you get.” Similarly, Cullen Roche captured the essence of market corrections perfectly: “The stock market is the only market where things go on sale and all the customers run out of the store.”
In times of market crashes, it’s essential to stay grounded. While emotions may drive investors to panic, disciplined investors who focus on value can seize opportunities. Low PE stocks, especially those with strong fundamentals, offer a chance to invest at a discount and reap long-term rewards.
That’s all for today’s post. Hope you get some valuable insights from here.
Happy reading!
Disclaimer
The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a period of time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfil their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.
