Markets
Indian Stock Markets In Meltdown Mode—Is It Time To Buy The Dip? Gold Is On Fire, And There’s No Stopping It!
The Indian stock market has been going through a rough patch, but could this be the perfect time to buy in? Turns out, about one-third of NSE 500 stocks are now cheaper than their pre-COVID valuations, based on price-to-earnings (PE) and price-to-book (P/B) ratios. Since the sharp market correction from October 1, several big names are trading 10-60% below their March 2020 levels on these key metrics.
Who’s on that list? Heavyweights like HDFC Bank, Bharti Airtel, ICICI Bank, SBI, Hindustan Unilever (HUL), Bajaj Finance, Kotak Mahindra Bank, Maruti Suzuki, Axis Bank, Bajaj Finserv, Avenue Supermarts, Coal India, and Asian Paints.
Why Are These Stocks Looking Cheap?
For banks, P/B ratios determine valuation, while for other companies, it’s PE and PB ratios. When these numbers drop below historical averages, it usually means a stock is undervalued.
Out of 414 NSE 500 stocks with available data, 120 stocks (28%) are now cheaper than they were before the pandemic.
So, what’s causing this? India’s market valuation has been shrinking for the past three quarters, largely because earnings growth has stalled. In some sectors, profits aren’t growing fast enough to justify past valuations, leading to a correction.
Certain large-cap stocks are now trading below their long-term industry averages, making them potential value buys.
Which Stocks Have Dropped in Valuation?
Even though some of these companies have performed well in the past five years, their valuation metrics have fallen.
—Hindustan Unilever (HUL) – Now trading at 51x PE, down from 68x in March 2020, with the stock up just 4% in that time.
—Bharti Airtel – PE has dropped from 110x to 76x, even as the stock has surged 215% in five years.
—Maruti Suzuki – Trading at 27.4x PE, 11% lower than in March 2020, despite a 96% gain in share price.
The Nifty 50 index has jumped 103% since March 2020, but interestingly, its PE ratio has dropped 8%, from 21.8 to 20. Meanwhile, the Nifty Midcap 150 has surged 200% over the same period but is now 28% more expensive, with a PE of 35x, up from 27x in 2020.
Banking Stocks in the Bargain Bin
Apart from ICICI Bank and SBI, other banking stocks trading below their pre-COVID P/B levels include Axis Bank, IndusInd Bank, Canara Bank, and Bank of India.
The lending sector has been struggling with margin pressure and slow deposit growth. But with lending and deposit growth now stabilizing, we could see lender valuations bounce back in the near future.
Sector-Specific Hurdles
Different industries have their own battles to fight:
—Paint companies are facing rising competition.
—Bajaj Finance is near historical valuation lows, thanks to concerns over unsecured retail lending exposure.
—FMCG & Consumer Stocks are expected to pick up in FY26, as higher disposable income and lower interest rates boost demand.
Gold is on fire, and there’s no stopping it!
In the past year, gold prices in India have surged by a whopping 38%, leaving the Nifty 50’s mere 3% return in the dust.
What’s even more surprising?
This rally has played out despite a strong U.S. dollar—defying the usual inverse relationship between gold and the greenback. There’s even chatter that the Bank of England’s underground gold vaults are emptying fast as investors and central banks rush to get their hands on physical gold.
Right now, gold is trading at a record high of $2,940 per ounce. But how high can it really go?
UBS just upped its gold forecast to $3,000 per ounce within the next 12 months, up from its earlier estimate of $2,850. Central banks have already bought 1,045 metric tons of gold this year—matching the levels of the past two years and doubling the 2011-2021 average of 500 metric tons. Even Citigroup has jumped on the gold bandwagon, predicting prices could hit $3,000 within three months, especially if a Trump 2.0 presidency materializes.
Gold enthusiast Egon Von Greyerz puts things in perspective: the total value of all the gold ever mined is around $17 trillion, while the top 10 U.S. companies alone are valued at $18 trillion. Microsoft alone has a $3 trillion market cap, the same as the total gold reserves held by central banks. “A massive gold revaluation is coming,” he recently declared on social media.
Gold vs. The Real Economy
Critics argue that gold doesn’t generate economic value like companies that produce goods and services. But in times of uncertainty, gold has always been the go-to safe haven. With ongoing trade tensions, fears of inflation, and signs of a Chinese economic revival, gold is once again proving its mettle as a hedge against volatility.
And it’s not just institutional investors piling in—bullion traders in Delhi’s Kucha Mahajani market say demand is through the roof, despite record-high prices. In January, gold ETFs saw their highest-ever monthly inflows at ₹3,751 crore, compared to just ₹640 crore in December.
So, is gold’s rally just getting started, or is this the peak? Either way, for now, the gold bulls are firmly in control
Investors’ Darling?
It’s not just retail and institutional investors piling into gold—global central banks are making big moves too. According to the World Gold Council, central banks purchased over 1,000 tonnes of gold in 2024, marking the third consecutive year of such aggressive buying. Even the Reserve Bank of India (RBI) joined the gold rush, adding 72.6 tonnes to its reserves last year, bringing its total holdings to 876.18 tonnes by the end of December. That’s a significant jump from the 18 tonnes added in 2023.
With gold inching closer to the $3,000 per ounce mark, investors are wondering—will it finally break through, or is this another psychological barrier where the rally could fizzle out? History suggests that gold has a habit of stalling at key millennial levels. It faced resistance around $1,000 per ounce in 1980, struggled near $2,000 in 2010, and now, $3,000 seems like the next big test.
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What’s Next?
Gold’s past rallies have been dramatic but unpredictable. Between 1976 and 1980, prices skyrocketed nearly 10x, only to enter a prolonged downtrend that lasted 22 years until 2002. The metal briefly touched $1,033 in March 2008 before correcting again. A fresh surge in 2009 pushed it to $1,923 by 2011, followed by another multi-year slump. Even in the recent bull run, it took four attempts between 2020 and 2024 for gold to decisively break past $2,000, with sharp corrections along the way.
This pattern suggests that simply crossing the $3,000 mark won’t be enough—it will need to hold above it for the rally to sustain. And that’s where caution creeps in.
Not Everyone’s Buying
Some heavyweight investors are hitting pause on gold. S Naren, CIO of ICICI Prudential AMC, believes this isn’t the time to jump in. “In the U.S., one of the investors we all admire has the largest holding of Treasury bills today. Taking a cue from him, you should put money in debt at this point, not in gold, because gold has already gone up substantially,” he said in a conversation with The Economic Times on February 11.
His logic is “You don’t put money in an asset class that’s at an all-time high and call it strategic asset allocation. You do that in something that hasn’t performed well—like debt or fixed deposits.”
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