ROI-India's stock rally hides slew of potential year-end bargains: Raychaudhuri

Inox Wind

23/12/2025 24:35

The views expressed here are those of the author, the founder and CEO of Emmer Capital Partners Ltd

By Manishi Raychaudhuri

HONG KONG, Dec  23 (Reuters) - India's flagship equity indices, Sensex .BSESN and Nifty 50 .NSEI, are near all-time highs, despite underperforming many Asian peers. Yet this exuberance hides another reality: many stocks are trading near their 52-week lows. These beaten-down names may offer investors some attractive year-end bargains.

While Indian equities are up some 9.5% for the year as a whole, this rally is concentrated in a relatively small group of firms.

When looking at the shares of 828 Indian companies with more than $500 million in market value, stocks of 109 were within 5% of their 52‑week lows and another 139 were only slightly above this level, as of December 5. In combination, these two categories of flagging stocks are roughly double the number of large Indian stocks trading close to 52‑week highs.

It's easy to assume these stocks are cheap for a reason, but, in many cases, their fundamentals tell a different story. For many of these laggards, earnings growth forecasts are robust, their balance sheets are healthy, and their valuations remain reasonable.

In fact, 14 of the 109 beaten‑down stocks clear a high bar, with expected earnings per share growth of more than 10% through 2027, low net debt, and price‑to‑earnings ratios at or below their forecast growth, according to the FactSet consensus.

Many are well‑known, liquid stocks, including four companies worth over $1 billion: Inox Wind INWN.NS, the telecommunications firm HFCL HFCL.NS, Tata Chemicals TTCH.NS, and logistics heavyweight Blue Dart BLDT.NS. All have strong projected earnings growth, with Blue Dart's forecast coming in the lowest at a still strong 28%.

WHAT SANK THEM?

Their declines are not driven by any sector-specific issue, so why have they lagged?

Mostly because of idiosyncratic factors and investors' narrow focus on the artificial intelligence theme.

Inox Wind started the year looking expensive with a PE ratio of 29.6, and its July share issuance, priced below the market, raised concerns about dilution for minority shareholders.

Valuation was also a concern for Blue Dart at the beginning of 2025, as it was trading at a lofty 41 times earnings. Sentiment then worsened sharply after the government issued a demand for additional taxes on one of its subsidiaries in September.

Meanwhile, Tata Chemicals suffered due to a drop in the price of soda ash - its key product - and a production outage at its plant in the U.S.

Finally, HFCL has disappointed investors, as it started out the year with a high P/E ratio of 36.4 only to see revenue fall 24% in the first nine months. On top of this, its owners borrowed money using more than half of their shares as security, raising concerns that lenders might sell those shares if the price fell further.

None of these issues are insurmountable, but in a year when India fell out of favour with many foreign investors, even small concerns had a disproportionately large impact on stock prices.

YEAR-END BARGAIN-HUNTING

Another key issue weighing on many Indian equities this year has been the omnipresence of the artificial intelligence theme, which has dominated investor attention to the detriment of other themes and stocks. Markets often misprice stocks during these dramatic single‑theme phases, enabling “weaker” shares to eventually outperform, if the underlying fundamentals are strong.

This recently occurred in India as many solid companies that were heavily sold off in 2024 came to be stellar performers in 2025.

At the end of 2024, 98 stocks were trading at or near their 52‑week lows. Of these, 18 were "quality" companies, with strong earnings growth forecasts, solid balance sheets and reasonable growth‑adjusted valuations. Fifteen – nine of which had market capitalisations above $5 billion – have gone on to beat the Indian market’s 9.5% return this year through December 22.

Again, these companies had strong earnings forecasts, and their P/E ratios, with the exception of Reliance Industries’ RELI.NS, were at or below their expected growth rates. In hindsight, therefore, their impressive performance in 2025 was unsurprising.

Of course, this pattern may not play out again this year, especially given India’s still-elevated trade tensions with the U.S. Moreover, good investment options do become harder to come by in markets that have rallied sharply.

But, in reality, even in a strong market, one can often identify high‑quality stocks whose prices have been left behind. It’s just a matter of searching hard, and in the right places.

(The views expressed here are those of Manishi Raychaudhuri, the founder and CEO of Emmer Capital Partners Ltd and the former head of Asia-Pacific Equity Research at BNP Paribas Securities.)

Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis of everything from swap rates to soybeans. Markets are moving faster than ever. ROI can help you keep up. Follow ROI on LinkedIn, and X.

​

India's flagship equity indices are at an all-time high https://www.reuters.com/graphics/ROI-ROI/ROI-ROI/lbpgmwnzbpq/chart.png

About 248 Indian mid-cap stocks are within 15% of 52-week lows https://reut.rs/4rIwVu0

Prominent, healthy Indian stocks near 52-week lows https://reut.rs/4pY1VVk

Nine healthy large-cap Indian firms that outperformed in 2025 https://reut.rs/4oMxOz8

 (Writing by Manishi Raychaudhuri
Editing by Marguerita Choy)

 ((Marguerita.Choy@thomsonreuters.com))