Two-thirds Nifty stocks trade at 10-70% discount to their 52-wk highs; should you buy?

Sensex stocks are also following a similar trend and 18 of them are trading at 10-70 percent lower than their respective 52-week highs.

Over two-thirds of Nifty stocks are trading at a double-digit discount to their respective 52-week highs, which has also pulled the index 5 percent lower in June-July.

These 34 stocks include Cipla, Titan, ONGC, Hero MotoCorp, ZEE Entertainment, Sun Pharma, JSW Steel, M&M, Maruti Suzuki and YES Bank, among others.

Sensex stocks are also following a similar trend and 18 of them are trading at 10-70 percent discount to their 52-week high.

Experts suggest investors wait for the cues rather buying due to attractive valuations. “Nifty has time and again disappointed the Street and the macros are also not lifting the sentiment either. In the midst of so much negativity, it is best to wait rather than jump into any stock.

There is still room for further decline. "Investors should look at the return on equity, free cash flows, exposure to debt, promoter pledge, operating efficiency, and other fundamental factors before catching a falling knife,” he added.

Table: Top 20 stocks based on returns that have fallen 10-70 percent from their respective 52-week highs.

The situation in the broader market is not encouraging either. 56 stocks in the top 500 on the NSE are trading at a discount of 50-90 percent from their respective 52-week highs.

They include SREI Infra, Jain Irrigation, Central Bank, Infibeam, HEG, Graphite India, Reliance Capital, Jet Airways, DHFL, Reliance Communications and Cox & Kings Ltd, among others.

These stocks though have fallen far from their respective highs and look reasonably valued, but unlikely to see a reversal soon, suggest experts. Hence, long term investors should stay away.

Table: Top 20 of NSE500 stocks that have fallen the most from their 52-week highs. 

The underperformance in the broader market is mainly a result of weak domestic sentiments and muted earnings expectations for Q1FY20.

Investors generally prefer investing in stable markets. Political uncertainty, unexciting earnings growth dampen their sentiments and keep them away from the markets.

In volatile markets, investors should avoid catching the falling knife and rather focus on fundamentally sound stocks with strong corporate governance, healthy balance sheet, comfortable valuations and good growth prospects.

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