Best Undervalued Stocks in India 2024: Top Fundamentally Strong Undervalued Stocks in NSE

Undervalued stocks are those shares traded at a price lower than their true or intrinsic value. Often overlooked by the broader market, these stocks can present an unique opportunity for investors seeking long-term gains. A range of factors, such as management quality, business strategies, and external conditions like geopolitical events, can influence a company’s stock price. However, the key lies in identifying stocks that are undervalued yet have the potential for growth. In this blog, we will explore the top 10 undervalued stocks in India, examining their potential benefits and drawbacks.

Top 10 Undervalued Stocks in India (2024)

Let’s have a look at the 10 best undervalued stocks to buy now based on the following fundamentals:

Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: The data in this under value share list is from 11th September 2024. This data is derived from Tickertape Stock Screener, using the following parameters:

• Stock Universe: Nifty 500
• PE ratio: Set low to high
• 5Y Historical EPS Growth: Set to high
• 5Y Average Net Profit Margin: Set to high

The PE Ratio is a key indicator used to assess whether a stock is currently undervalued and has potential for future profitability. Generally, a lower PE ratio suggests a higher 5-year average net profit margin.

The 5-year historical growth in earnings per share (EPS) and the average net profit margin provide insights into a company’s overall profitability and financial stability. A higher net profit margin indicates strong pricing power and effective cost control.🚀 Pro Tip: You can use Tickertape’s Stocks Screener to research and evaluate stocks with over 200+ filters and parameters.

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Overview of the Top Undervalued Stocks for 2024

Tamilnad Mercantile Bank Ltd

Established in 1921 as ‘Nadar Bank Limited,’ the bank was renamed ‘Tamilnad Mercantile Bank Limited’ in 1962. Headquartered in Thoothukudi, Tamil Nadu, it has a significant presence with 369 branches, 941 ATMs, and 238 cash recycler machines (CRMs) as of 30th June 2021. As of 11th September 2024, the company had a market capitalisation of Rs. 7,676.88 cr., and its share price closed at Rs. 484.80. Over the last 5 years, the company’s net income has grown at a yearly rate of 32.9%, higher than the industry average of 31.6%. 

Godawari Power and Ispat Ltd

Godawari Power & Ispat Ltd, the flagship company of the Raipur-based Hira Group of Industries, is an integrated steel manufacturer with a strong presence in the long product segment of the steel industry, particularly in mild steel wire production. As of 11th September 2024, the company had a market capitalisation of Rs. 12,300.44 cr., and its share price closed at Rs. 919.35. Over the last 5 years, the company’s revenue has grown at a yearly rate of 10.88%, higher than the industry average of 9.97%, and its market share increased from 0.62% to 0.71%. 

CreditAccess Grameen Ltd

CreditAccess Grameen Limited, formerly known as Grameen Koota Financial Services Pvt. Ltd., is a Bengaluru-based microfinance institution providing affordable financial products and services. Its lending products support various needs, including income generation, education, medical expenses, festivals, home improvement, water and sanitation, and emergencies. As of 11th September 2024, the company had a market capitalisation of Rs. 19,352.81 cr., and its share price closed at Rs. 1,213.70. Over the last 5 years, the company’s revenue has grown at a yearly rate of 32.15%, higher than the industry average of 14.64%, and its market share increased from 1.04% to 2.28%. 

Can Fin Homes Ltd

Can Fin Homes Ltd, established on 29 October 1987 in collaboration with Canara Bank, HDFC, and UTI, was created to promote home ownership and increase the housing stock across India. As of 11th September 2024, the company had a market capitalisation of Rs. 11,300.79 cr., and its share price closed at Rs. 848.70. Over the last 5 years, the company’s revenue has grown at a yearly rate of 15.28%, higher than the industry average of 1.5%, and its market share increased from 1.05% to 6.65%. 

ICICI Securities Ltd

ICICI Securities, founded in 1995 as a financial marketplace, has grown into a diverse provider of financial services, including investing, trading, wealth management, mutual funds, insurance, and loans. The company has pioneered several innovations, such as online trading platforms, margin lending, and research services. It is one of the top undervalued bank stocks in India. As of 11th September 2024, the company had a market capitalisation of Rs. 27,201.48 cr., and its share price closed at Rs. 839.60. Over the last 5 years, the company’s revenue has grown at a yearly rate of 23.95%, higher than the industry average of 11.41%, and its market share increased from 5.03% to 8.01%. 

Motilal Oswal Financial Services Ltd

Motilal Oswal Financial Services Ltd (MOFSL) is a non-banking financial company (NBFC) registered under the Reserve Bank of India Act of 1934. Founded on 18th May 2005, the company began its operations on 3rd June 2005 and quickly expanded its range of financial products and services. As of 11th September 2024, the company had a market capitalisation of Rs. 44,093.04 cr., and its share price closed at Rs. 736.85. Over the last 5 years, the company’s revenue has grown at a yearly rate of 23.7%, higher than the industry average of 11.19%, and its market share increased from 2.58% to 5.32%. 

Gujarat Mineral Development Corporation Ltd

Gujarat Mineral Development Corporation Ltd (GMDC) is a leading mining and mineral processing company in India, recognised as the largest merchant seller of lignite in the country. The company produces lignite, bauxite, calcined bauxite, fluorspar, and manganese ore, and is also involved in power generation. GMDC supplies lignite to various industries, such as textiles, chemicals, ceramics, bricks, and captive power plants. As of 11th September 2024, the company had a market capitalisation of Rs. 11,848.68 cr., and its share price closed at Rs. 372.60. Over the last 5 years, the company’s revenue has grown at a yearly rate of 6.17%, higher than the industry average of 5.6%, and its market share increased from 7.99% to 8.21%. 

Angel One Ltd

Angel One Limited, previously known as Angel Broking Limited, was incorporated on 8th August 1996. It became a public limited company on 28th June 2018 following a Certificate of Incorporation from the Registrar of Companies. As India’s largest independent listed full-service retail broking house, the company serves over 13.8 million clients, with 4.3 million active on the NSE. As of 11th September 2024, the company had a market capitalisation of Rs. 22,104.24 cr., and its share price closed at Rs. 2,452.35. Over the last 5 years, the company’s revenue has grown at a yearly rate of 40.24%, higher than the industry average of 11.41%, and its market share increased from 2.3% to 6.79%. 

eClerx Services Limited

eClerx Services Limited, originally incorporated as eClerx Services Private Limited on 24th March 2000, became a public company in August 2007. The company offers data analytics and customised process solutions from its offshore centres in India. Its service portfolio includes data analytics, operations management, data audits, metrics management, and reporting services. As of 11th September 2024, the company had a market capitalisation of Rs. 12,936.63 cr., and its share price closed at Rs. 2,755.40. Over the last 5 years, the company’s revenue has grown at a yearly rate of 15.12%, higher than the industry average of 6.18%, and its market share increased from 11.28% to 16.9%. 

Five-Star Business Finance Ltd

Five-Star Business Finance Limited was established as Five-Star Business Credits Private Limited in Chennai, Tamil Nadu, on 7th May 1984. The Registrar of Companies issued a new Certificate of Incorporation on 13 May 2016. The company operates as a non-banking financial institution, registered with the Reserve Bank of India, and does not accept public deposits. As of 11th September 2024, the company had a market capitalisation of Rs. 21,861.15 cr., and its share price closed at Rs. 747.45. Over the last 5 years, the company’s revenue has grown at a yearly rate of 15.12%, higher than the industry average of 6.18%, and its market share increased from 11.28% to 16.9%.

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How to Invest in Undervalued Stocks in India?

Investing in undervalued stocks in India can be done through a few different avenues. One common way is direct stock picking, where you research and choose between various undervalued stock picks. Another option is through mutual funds, investment portfolios that focus on value investing – these funds pool money from different investors and invest in a diversified portfolio of undervalued stocks in India. Additionally, exchange-traded funds (ETFs) centred on undervalued stocks in India can be a convenient way to invest in a basket of such stocks that track a specific index.

What are Undervalued Stocks?

Undervalued stocks in India are those that are trading at a price lower than their real or intrinsic value. They are also called stocks below intrinsic value. In other words, the market may not fully recognise or appreciate the true worth of these stocks. 

This could occur due to various reasons, such as temporary market conditions, company-specific factors, or investor sentiment. Identifying underperforming stocks in India doesn’t potentially mean finding cheap stocks. The key is to look for quality undervalued stocks in India at prices under their fair values rather than looking for useless stocks at a very low price.

Features of Undervalued Stocks

• Priced Below Intrinsic Value: Undervalued stocks are shares that trade below their intrinsic value, making them attractive to value investors. What is an undervalued stock? It is essentially a stock whose market price is lower than its financial metrics suggest, offering growth potential at a discounted price.
• Growth Potential with Lower Investment: One of the key features of undervalued stocks today is their potential for future price correction. Investors can acquire these stocks at a lower price, hoping to benefit when the market recognises their true value.
• Strong Fundamentals: Many undervalued stocks, especially in sectors like IT, have strong fundamentals despite being overlooked by the market. For instance, undervalued IT stocks in India have solid business models and steady earnings, indicating they are poised for growth.
• Low Risk in Established Companies: Undervalued large cap stocks in India offer a balance between stability and growth. Large-cap companies have proven track records, making them part of low risk stocks in India, which are less volatile while still offering a chance for price appreciation.
• Attractive for Long-Term Investors: Investors focused on the long term often look for top undervalued stocks in India, as these stocks can deliver significant returns once the market corrects the undervaluation.

What are the Advantages and Disadvantages of Undervalued Shares?

Overall, undervalued shares can be a good investment for investors who are willing to take on some risk and who have a long-term investment horizon. However, it’s important to look at the advantages and disadvantages of undervalued stocks in India.

Advantages

• Potential Returns: Undervalued stocks in India are typically trading below their intrinsic value, which means that they have the potential to appreciate in value over time. 
• Lower Prices: It presents an opportunity for investors to buy undervalued power stocks India at lower prices than what they have to pay for stocks that are trading at their fair value. 
• Value Investing: Investing in undervalued stocks NSE in India is a basic strategy in value investing. It involves identifying stocks that are trading below their intrinsic value and holding them until their value goes up.

Disadvantages

• Limited Liquidity: Underperformed stocks in India may have limited trading volume, which makes them difficult to sell quickly when needed.
• Longer Time-Horizon: Investing in undervalued power stocks in India can be a longer time horizon as the market may take time to realise the company’s true value.
• Risk of Loss: There is always the risk that an undervalued stock will not appreciate in value due to cyclical fluctuations in the market or other reasons. In fact, the stock can continue to decline in value, or it may even go bankrupt.

What are the Strategies for Mitigating Risks and Maximising Returns?

While undervalued stocks do come with a couple of risks, there are a number of strategies that investors can use to mitigate risks and potentially maximise returns while investing in the most undervalued stocks in India. Some of these strategies include:

• Diversification: By investing in a variety of most undervalued stocks in NSE India, you can reduce your risk if one stock performs poorly.
• Do Your Research: Before investing in any undervalued stock, research company’s balance sheets, read analyst reports, and follow industry news. 
• Invest for the Long Term: Undervalued stocks in India, including undervalued stocks in Nifty 50, can be volatile in the short term, but they have the potential to appreciate in value over the long term.
• Set Realistic Expectations: Don’t expect to get rich quickly. Instead, focus on investing for the long term and gradually building your wealth.
• Use Stop-Loss Orders: A stop-loss order is an order to sell a stock if it falls below a certain price. This can help you to limit your losses if an undervalued stock begins to decline in value.

As always, investors must do their own research and/or consult their financial advisor before investing.

Key Factors and Ratios for Evaluating Undervalued Shares

When assessing the most undervalued stocks in India, several critical factors and ratios can come into play, providing investors with valuable insights about undervalued stocks in India.

• Price-to-Earnings (P/E) Ratio: A lower P/E ratio of a stock suggests that a stock may be undervalued, as investors are paying less for each unit of earnings. 
• Price-to-Book (P/B) Ratio: A lower P/B ratio implies that the stock may be undervalued relative to its book value. It suggests that investors are potentially paying less than the company’s net worth per share.
• Dividend Yield: A stock with a higher dividend yield might indicate that investors can receive good returns on their investment through dividends, potentially suggesting undervaluation.
• Earnings Per Share (EPS) Growth: A higher EPS growth rate indicates that the company is performing well and is likely to continue growing in the future. Thus, this can enhance the value of a stock and price-to-earnings (P/E) ratio.
• Return on Equity (ROE): A higher ROE indicates that the company is efficiently utilizing its assets and generating a significant return on investment.
• Debt-to-equity Ratio: The D/E ratio measures a company’s debt against its assets. A higher debt-to-equity ratio signifies that a company has more debt than equity.

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To Wrap It Up…

Undervalued stocks in India have a market value that is lower than their intrinsic value. They offer the chance to purchase shares from well-established companies at a lower price. However, it is important to do your research and understand the risks involved before investing in any undervalued stock.

Frequently Asked Questions About Undervalued Stocks in India