The stock markets have been shaken up by the COVID-19 outbreak. While the crisis is devastating, it does present some excellent investing opportunities. Here are 3 stocks on the National Stock Exchange (NSE) of India that in my opinion are well priced for the value they offer:
- Raymond (NSE: RAYMOND)
Raymond is a quintessential Indian brand well known for its catchy tagline – The complete man.
From a stock market perspective, Raymond has been historically volatile, however was comfortably moving in the 550 – 850 range for the 6 month period until 1st week of February 2020. Subsequently, the stock took a massive hit – it fell 70% to a low of Rs. 210 on 30th March 2020.
The drop was largely due to bleak future prospects owing to the COVID-19 crisis exaggerated by the trend seeking retail investor.
However, the company’s fundamentals seem to be on point. As shown below, Raymond’s quarterly revenue has improved significantly in FY 2019-20. While earnings have been lower, owing to sluggish overall domestic demand, the future for Raymond looks bright (after adjusting for COVID-19).
Raymond plans to appoint a new CEO and transition into a lifestyle business after a demerger at the Raymond group. This, along with recovery from COVID-19 might well be the kick needed by the stock to recover. Looking at historical data, Raymond has often found support near the 700-750 mark, with several price action zones in the last 3 years. Therefore, at Rs. 242, Raymond is an easy buy & hold for the medium term. The more risk averse investor could wait until the 25 and 50 day SMA lines next intersect. Finally, Raymond appears on the bottom end of the bollinger bands signalling a potential mean reversal for the short term gains seeker.
- Steel Authority of India Limited (NSE: SAIL)
SAIL is India’s largest steel manufacturer and a part of India’s 7 Maharatna public sector companies.
SAIL’s performance in FY 2019-20 has been less than ideal – revenues dropped 5.6% and the company is in the red. Weak earnings combined with the COVID-19 impact has dropped SAIL’s stock to mid 20s, which was last seen in 2004.
The good news is, this seems more of an exception than a trend given the overall economic slowdown. A recovery, albeit slow, is certainly in order. It may be as late as post full recovery from COVID-19 once the government’s infrastructure pipeline is back in action. An added boost (though a long shot at this stage) may be some International industrial player deciding to shift their manufacturing bases to India.
All things considered, with closest resistance points at 2x and 3x the price today, SAIL will yield excellent returns. However, investors must be willing to hold at least until December 2020
- Ashok Leyland (NSE: ASHOKLEY)
Ashok Leyland is India’s very own commercial vehicle manufacturer – from light tempos to full scale logistic beasts.
The stock has often found comfort around the Rs. 80 price point, where we see it clearly resisting the downtrend in early 2020. However, the sell-off triggered by COVID-19 led to the stock changing course. Rightly so, given that the Q4 is AL’s sales harbinger and sales for March ‘20 are down 90% compared to March ‘19.
The good news is that the price drop is an overreaction due to a worldwide sell-off and investors flocking to safe havens (bonds & gold) at the onset of COVID-19. A fast recovery should be in place once the pandemic is a thing of the post. Thus, Ashok Leyland is a buy and hold for the medium to long term. Investors looking to cash out on the recovery hype should target late seventies / early eighties. Long term investors should consider this an opportunity to get in at a sweet price.
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