If you’re looking to invest in the stock market, you may have heard of value stocks. But what exactly are they, and why should you consider them for your investment portfolio? This blog will explore the concept of value stocks India, their benefits, how to identify them, and common mistakes to avoid when investing in them.
Let us now understand what is a value stock.
What are Value Stocks?
Shares of companies that are trading at a discount are known as value stocks. Since investors have yet to see the firm’s potential, they are typically regarded as undervalued stock in the share market. As a result, the price of these stocks doesn’t correspond to the company’s strengths or prospects. The majority of them are young, emerging businesses. Since many of them operate in industries like IT that are saturated with powerful corporations, they must perform well in order to attract investors’ attention.
Value stock investing is based on the idea that the market will recognise the stock’s true potential, and it will increase in value while making strong returns. Now that we know what is value stock investing, let’s check out our curated list of the top value stock picks in India.
Top 10 Value Stocks in India to Consider in 2024
Now that we have explored the value stocks meaning, let’s take a look at this list of the top rated value stocks India 2024. Here are the best value stocks to consider in India:
|Market Cap (in Cr)
|Accelya Solutions India Ltd
|Tata Consultancy Services Ltd
|Housing and Urban Development Corporation Ltd
|Coal India Ltd
|Alkyl Amines Chemicals Ltd
|Hindustan Unilever Ltd
|Manali Petrochemicals Ltd
|Colgate-Palmolive (India) Ltd
Note: The data in the list is from 24th January 2024. However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!
Is value stock a good investment?
Risky investment: Because value stocks are inexpensive, they have lower metric ratios. When the market corrects prices, value stocks are anticipated to appreciate in value eventually. Investors run the risk of losing money if the stock doesn’t increase in value as predicted. Value stocks are, therefore, a bit riskier as an investment.
Overview of the best value stocks in India
The valuation of stocks indicates that these are the Value Stocks to look out for in 2024! Here is a brief overview of the best Value Stocks to invest in India. The stock value of these companies is very high:
LTIMindtree, formerly Larsen & Toubro Infotech, is an India-based global technology consulting and digital solutions company. On a trailing 12-month basis, it records an operating revenue of Rs. 34,240.90 Cr. With an outstanding annual revenue growth of 109%, a great pre-tax margin of 17%, and an exceptional ROE of 26%, making it one of the best value stocks to buy now in India.
Accelya Solutions India Ltd
Accelya Kale Solutions Limited provides software solutions to the airline and travel industry. The Company also offers services, such as computer programming, consultancy and related activities. On a trailing 12-month basis, it reports an operating revenue of Rs. 469.36 Cr. With an outstanding annual revenue growth of 27%, a great pre-tax margin of 36%, and an exceptional ROE of 46%, making it one of the top value stocks in India.
Tata Consultancy Services Ltd
Tata Consultancy Services Limited (TCS) is engaged in providing information technology (IT) services, digital and business solutions. On a trailing 12-month basis, it records an operating revenue of Rs. 232,081.00 Cr. It exhibits an outstanding annual revenue growth of 17%, a great pre-tax margin of 25%, and an exceptional ROE of 46%, making it one of the best value stocks India.
Housing and Urban Development Corporation Ltd
The Housing and Urban Development Corporation generated Rs. 7,269.37 Cr. in revenue over the past 12 months. While the 1% annual revenue growth is modest, the impressive pre-tax margin stands at 32%, indicating financial strength. Additionally, the 11% return on equity (ROE) reflects a solid performance. It is one of the value investing stocks India for 2024.
Crisil boasts an impressive operating revenue of Rs. 3,044.04 Cr. over the past year, reflecting a remarkable annual growth of 22%. Notably, the pre-tax margin stands at an impressive 27%, while the exceptional Return on Equity (ROE) is an outstanding 31%. It is one of the highest book value share in India.
Coal India Ltd
Coal India (NSE) boasts an impressive operating revenue of Rs. 142,081.29 Cr. in the last 12 months. With a remarkable 27% annual revenue growth, a solid pre-tax margin of 27%, and an exceptional ROE of 49%, its financial performance stands out. It is considered one of the best stocks for value investing India.
Alkyl Amines Chemicals Ltd
Alkyl Amines Chemicals generated a robust operating revenue of Rs. 1,562.13 Cr. in the last 12 months. With an impressive 9% annual revenue growth, a notable pre-tax margin of 18%, and an exceptional return on equity (ROE) of 19%, the company demonstrates strong financial performance.
Hindustan Unilever Ltd
Hindustan Unilever generated an impressive operating revenue of Rs. 61,931.00 Cr. in the past 12 months, marking a remarkable annual growth of 16%. Notably, the pre-tax margin stands at an impressive 22%, while the return on equity (ROE) reaches an exceptional 20%.
Manali Petrochemicals Ltd
Manali Petrochemical generated Rs. 1,142.54 Cr. in operating revenue over the past 12 months. However, a concerning annual revenue de-growth of -29% signals the need for improvement. While the pre-tax margin stands at 6%, which is satisfactory, the ROE at 4% is considered fair but also warrants enhancement.
Colgate-Palmolive (India) Ltd
Colgate-Palmolive India earned an impressive operating revenue of Rs. 5,436.66 Cr. in the last 12 months, with an exceptional 61% Return on Equity (ROE).
How to invest in value stocks?
Value stocks in India can be valuable to any investment portfolio, providing diversification and potential returns.
One way to invest in value shares is through traditional stock market investing. This involves researching individual companies and buying shares of stock directly. The importance of valuation here is great.
Another way to invest in these stocks in India is through exchange-traded funds (ETFs). Investors can choose from various value-oriented ETFs, which provide exposure to a diversified portfolio of valued shares.
Mutual funds are another option for investing in value shares. These are professionally managed investment portfolios that pool money from multiple investors to buy a diversified portfolio of stocks. Like ETFs, there are a variety of mutual funds that focus on value investing.
Investing in value stocks via smallcase
You can also invest in a basket of value stocks via smallcase. Simply go to smallcase.com or the smallcase app, and login via your phone number. Then, go to ‘Discover‘ and then click on ‘All smallcases‘. There you can filter the smallcases based on ‘investment strategy’ by selecting ‘value’. You’ll find an array of stock portfolios that are based on the value investing strategy. Just pick the one that fits your investment criterion.
Make sure that you do your diligent research before picking the right stock, keeping in mind your long-term investment goals and risk appetite.
However, if you’re confused about which stocks to pick, you can explore smallcases:
- smallcases are readymade portfolios of stocks/ETFs, that are based on a theme idea or strategy
- They’re created and managed by SEBI-registered experts
- smallcase.com offers over 200+ stock portfolios, created by 180+ managers
- Some of the popular smallcases among new investors are as follows:
Disclosures for aforementioned smallcases
Factors to help identify a Value Stock
Here are some measures used by investors to estimate the value of a company’s stock:
- P/S ratio or the Price-to-sales ratio: In this approach, the estimation is made by dividing the market capitalization by the total annual income of the firm. Market capitalization is calculated by multiplying the number of outstanding shares by the share’s current market value. A low price-to-sales ratio could be an indicator of a value stock.
- P/E ratio or Price-to-earnings ratio: It is determined by dividing the stock price by the company’s earnings per share. The ratio makes it easier to see how the market’s stock price and actual earnings per book are connected. Low price-to-earnings ratio shows that it’s an undervalued share because the market has not yet realized its potential.
- P/B Ratio or the Price-to-book ratio: This is calculated by dividing the stock price of a company by its book value. The ratio of a company’s common shares to its outstanding shares is called book value per share (BVPS). This shows the asset value of a corporation on a per-share basis.
- Free cash flow: You should also look out for a company’s free cash flow, which represents a company’s net cash flow following all capital and operating expenses.
- Historical performance: To determine how they will fight bears in the future, you may also examine their past performance and how they have handled challenging economic times. Additionally, you may examine their future goals and determine how much potential they have.
Features of the Best Value Stocks in India
Value stocks, being undervalued, are priced lower than growth stocks. They exhibit key characteristics, including a high dividend yield resulting from underperforming securities and a low price-to-earnings ratio. Additionally, value stocks demonstrate stability with less price volatility during market fluctuations, whether in highs or lows.
- Affordability: Value stocks, priced lower than their growth counterparts, offer an affordable entry point for investors.
- Dividend Yield: These stocks boast a high dividend yield, a result of underperforming securities, providing an attractive source of income for investors seeking dividends.
- Stability in Price: A distinctive trait of value stocks NSE is their resilience to market fluctuations, maintaining a steadier price even during market highs and lows.
By focusing on these features, investors can strategically incorporate value stocks into their portfolios for a more balanced and stable investment approach.
What are the various features of Value stocks?
Here are the various characteristics of Value Stocks:
- Strong dividend payout: Value stocks in India are often those of large, well-established businesses that are discounted for a number of reasons, such as poor PR, a weak earnings season, etc., but who eventually recover their worth over the long run. They often have strong dividend payout ratios and don’t spend their full retained earnings back into the business.
- Cheaper price: The stock’s price is typically lower than other stock categories. This facilitates financial investment in them.
Risks to look out for while investing in Value Stocks
Here are a few common mistakes that can become potential risks, while investing in these stocks.
- Focusing solely on low price: A low price does not necessarily indicate a good value investing stocks.
- Ignoring fundamental analysis: It’s important to conduct a thorough fundamental analysis to ensure the company has strong fundamentals.
- Overlooking market trends: While investing in value stocks requires a long-term strategy, it’s also important to consider market trends and potential headwinds.
- Not having a long-term investment strategy: Investing in value pick stocks India requires patience and a long-term investment horizon.
Advantages of investing in Value Stocks
Here are the various advantages of investing in Value Stocks:
- Historical performance: Historically, value stocks have outperformed growth stocks over the long term.
- Lower risk: Value stocks are often considered less risky than growth stocks and the downside risk may be limited.
- Long-term investment: Investing in value stocks requires a long-term investment strategy, which can help to reduce the effects of short-term market volatility.
- Diversification: Investing in value stocks can help to diversify your portfolio and reduce overall portfolio risk.
To Wrap It Up…
In conclusion, investing in a value investing strategy can be apt for any investment portfolio. By identifying these stocks with the potential to rise in value over time, investors can achieve diversification, potential returns, and a margin of safety. Whether you choose traditional stock market investing, ETFs, or mutual funds, it’s important to do your research and consider the company’s financial health, growth potential, and industry trends before making a decision.
Remember, investing in value shares requires patience and a long-term perspective, but it can be a rewarding way to build wealth over time.
1. LTIMindtree Ltd
2. Accelya Solutions India Ltd
3. Tata Consultancy Services Ltd
Note: This list is for educational purposes only, and is not recommendatory.
You can invest in a basket of value stocks via smallcase. Simply go to smallcase.com or the smallcase app, and login via your phone number. Then, go to ‘Discover‘ and then click on ‘All smallcases‘. There you can filter the smallcases based on ‘investment strategy’ by selecting ‘value’. You’ll find an array of stock portfolios that are based on the value investing strategy.
In 2022, high book value stocks outperformed growth stocks as the Federal Reserve raised interest rates. However, in 2024, growth stocks have outperformed worth stocks so far. Investors must consider their investment goals and risk appetite before investing in Value Stocks.
Defensive investors with low risk tolerance can find value stocks appealing. These stocks offer protection against losses and the potential for gains when the market realizes their true worth during stock valuation. However, one must asses their investment goals and risk appetite before investing.
Value stocks, compared to growth stocks, carry lower risk. They exhibit greater stability and lower volatility, providing moderate potential for capital appreciation while offering a consistent income stream through dividends. Investors should comprehend both growth potential and challenges posed by these stocks.
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