Top 10 Undervalued Stocks in India

Imagine buying a valuable art piece at half its price! Now, apply that to your stock portfolio by investing in undervalued stocks—shares trading below their true worth. In the dynamic Indian stock market, finding these hidden gems can be a game-changer for long-term growth.

Additionally, knowing what are undervalued stocks that helps you to understand all the terminology in detail.

This article explores the top undervalued stocks in India for 2024 and why they could be your next big win.

Best Undervalued Stocks for 2024

Let’s check out the list of the best-undervalued stocks in India for 2024:

Disclaimer: The information provided here is intended for educational purposes. Do not consider the given data as financial or investment advice. It is advisable to conduct thorough research or consult a qualified professional before making any investment decision. Stock market investments are subject to market risks, and past performance does not guarantee future results.

Top Under Valued Stocks - Overview

Here’s an overview of the top 10 undervalued stocks in India for 2024, highlighting why these stocks could be prime investment opportunities:

CanFin Homes Ltd:

Company Background: CanFin Homes is one of the emerging leaders in the housing finance sector in India, specialising in affordable home loans. The company has a strong presence in the housing finance sector has helped them capitalise on government initiatives promoting home ownership.

Future Prospect: Strong potential for growth, especially with the government’s push for affordable housing schemes.

Tamilnad Mercantile Bank Ltd:

Company Background: Tamilnad Mercantile Bank is a well-established private-sector bank with a strong foothold in rural and semi-urban India. It offers a wide range of banking services, with a focus on agricultural loans and rural banking.  

Future Prospects: Expansion plans in rural banking are likely to drive future growth.

Varanium Cloud Ltd:

Company Background: Varanium Cloud provides cloud computing services, helping businesses digitalise their operations. The growing demand for cloud solutions and digital transformation offers this company strong growth prospects.

Future Prospects: With cloud computing gaining attention, the company is well-positioned for growth.

Godavari Power and Ispat Ltd:

Company Background: A diversified company with interests in steel production and power generation, Godavari Power and Ispat is well-positioned to benefit from the rising demand for infrastructure development.

Future Prospects: Expansion in both domestic and international markets will enhance its growth potential.

Balmer Lawrie Investments Ltd:

Company Background: Balmer Lawrie Investments operates in sectors such as logistics, manufacturing, and oil and gas. As a government enterprise, it benefits from a stable business model and diversified portfolio.

Future Prospects: The company's strong presence in logistics and infrastructure development offers significant growth opportunities.

CreditAccess Grameen Ltd:

Company Background: CreditAccess Grameen is a leading microfinance institution serving underserved rural communities in India. The company focuses on providing small loans to women and rural entrepreneurs.

Future Prospects: Continued demand for microfinance services across India offers a strong growth trajectory.

ICICI Securities Ltd:

Company Background: ICICI Securities is a leading player in financial services, providing brokerage and investment advisory solutions. It benefits from a large client base and increasing retail participation in the stock market.

Future Prospects: Rising retail participation in the stock market boosts its growth outlook.

Five-Star Business Finance Ltd:

Company Background: Five-Star Business Finance provides small business loans, primarily targeting underserved businesses in semi-urban and rural areas. The company focuses on niche lending segments with high growth potential.

Future Prospects: Increased focus on rural lending provides a strong foundation for future growth.

Gujarat Mineral Development Corporation Ltd:

Company Background: Gujarat Mineral Development Corporation (GMDC) is a key player in India’s mining sector, focusing on the extraction of lignite, bauxite, and other minerals. The company also has investments in renewable energy.

Future Prospects: The company’s expansion into renewable energy projects offers additional growth opportunities.

eClerx Services Ltd:

Company Background: eClerx provides business process outsourcing, data analytics, and digital services to global clients. Its diverse clientele and expertise in digital operations give it a strong foothold in the global outsourcing market.

Future Prospects: Digital transformation trends in the global market present a promising outlook.

These undervalued stocks represent a mix of high-growth sectors and stable businesses. Each stock is positioned to benefit from sector-specific tailwinds and offers the potential for substantial long-term gains, making them worthy of consideration for 2024.

Why Should You Invest in Undervalued Stocks?

Investing in undervalued stocks offers a compelling opportunity to purchase shares at a discount compared to their true or intrinsic value. Here are a few key reasons to consider investing in undervalued stocks:

• Buying at a Discount: Undervalued stocks allow investors to buy shares at a price lower than the company’s intrinsic value, making them attractive for investors looking for long-term growth.
  
• High Return Potential: Once the market corrects its misjudgment, these stocks can provide substantial returns as they appreciate, often outperforming the broader market.
  
• Long-Term Growth: Investors with a long-term horizon can benefit from holding undervalued stocks as the company’s business fundamentals improve and reflect in the stock price over time.
  
• Reduced Downside Risk: Since undervalued stocks are already priced lower, the risk of further decline may be limited, offering a cushion against market volatility.
  
• Market Inefficiencies: The stock market doesn’t always reflect the true value of a company in the short term. For patient investors, these inefficiencies can be capitalised on for potentially higher returns.

How to Evaluate Undervalued Stocks?

Identifying undervalued stocks requires a combination of fundamental and technical analysis. Investors must assess the company's financial health and stock market trends to determine whether the stock is truly undervalued. Below are key factors to consider:

Fundamental Analysis:

• Price-to-Earnings Ratio (P/E): Compare the stock’s P/E ratio to its industry peers. A lower P/E ratio may indicate the stock is undervalued relative to its earnings.
  
• Earnings Per Share (EPS): A company’s EPS reflects its profitability. A consistently growing EPS might suggest that the stock is undervalued if its price hasn’t caught up to this growth.
  
• Price-to-Book Ratio (P/B): This ratio compares a stock’s market value to its book value (assets minus liabilities). A low P/B ratio could indicate that a stock is trading below its book value, signalling undervaluation.
  
• Debt-to-Equity Ratio: Analyse a company’s financial leverage. Stocks of companies with low debt relative to their equity may be undervalued if the market underestimates the company’s financial stability.
  Cash Flow: Consistent and strong cash flow indicates that the company is generating steady revenue. Stocks of companies with strong cash flow might be undervalued if they’re trading below their peers

Technical Analysis:

• Price Trends: Reviewing past price movements can help identify patterns that may signal whether the stock is undervalued.
  
• Moving Averages: Short and long-term moving averages (e.g., 50-day and 200-day) help identify potential buying opportunities when stocks trade below these averages.
  
• Relative Strength Index (RSI): The RSI measures a stock’s recent trading performance to determine if it’s oversold (below 30), potentially signalling undervaluation, or overbought (above 70).
  
• Volume Trends: Analysing trading volumes can help investors understand market sentiment and identify moments when a stock might be undervalued.

Risks and Mitigations

While undervalued stocks offer attractive upside potential, they come with their share of risks:

Risks:

• Company-Specific Risks: The stock may be undervalued for a reason, such as poor management or weak industry prospects, which may not improve.
  
• Market Misjudgment: Sometimes, the market correctly values a stock, and it may not recover from its undervaluation due to structural issues within the company or sector.
  
• Macro-Economic Factors: Economic downturns, inflation, or geopolitical instability can delay the market’s correction of an undervalued stock’s price.

Mitigations:

• Diversification: Spread your investments across different sectors and industries to minimise risks associated with individual stocks or economic factors.
  
• Thorough Research: Conduct in-depth research, combining both fundamental and technical analysis, to ensure that the undervaluation is temporary and not due to a permanent decline in the company’s prospects.
  
• Monitor the Market: Stay updated on economic conditions, industry trends, and company-specific news to ensure timely decisions when investing in undervalued stocks.

Concluding Thoughts

Undervalued stocks offer an exciting opportunity for investors seeking long-term wealth creation. By purchasing shares at a discounted price, you set yourself up for substantial gains when the market eventually corrects its valuation. The 10 best-undervalued stocks in India for 2024, listed above, offer a diverse range of investment opportunities across various industries, each with significant upside potential. However, remember that patience and thorough analysis are key. It's essential to continually evaluate these stocks and their industry dynamics to ensure they align with your investment strategy.

Recommendations:

Stay Informed: Regularly update yourself with market news and trends, especially on sectors that are likely to outperform.

Enhance Your Knowledge: Learn to evaluate stocks using both fundamental and technical analysis to identify undervalued opportunities early.

Diversify Your Portfolio: To mitigate risk, maintain a balanced and diversified portfolio, ensuring exposure across different industries and asset classes.

By following these suggestions, you can maximise your potential returns while managing risks and positioning yourself to benefit from some of the most undervalued stocks in India for 2024.

Also, if you are looking for a reliable stock broker to open a free Demat account to start investing in undervalued stocks, you could rely on Choice.