Pick: An Oversold Large-Cap Looking Tempting to Investors

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Pick: An Oversold Large-Cap Looking Tempting to Investors
Credit: © Reuters.

The broader markets continue their fall for the third straight session, with the benchmark Nifty 50 index taking a hit of 69 points to 22,204, by 10:35 AM IST. Despite negative sentiments, the markets have noticeably recovered from their respective lows as investors are now finding this dip as a buying opportunity.

The same scenario could play out with LTIMindtree (NS: LTIM ) Limited. It is a technology consulting and digital solutions company, providing information technology services and solutions in India, North America, Europe, and internationally, and has a market capitalization of INR 1,42,606 crore.

The latest shareholding pattern reveals that FIIs have ramped up their stake to 8.65% in the December 2023 quarter, the highest in the last 4 quarters. Even mutual funds which held a stake of 5.99% a year ago have now increased it to 7.06%.

The stock has taken a good hit in the last 3 months, falling 24.6%, clearly underperforming the Nifty IT index, which is down around 6.5% in the same period. The fall has been relentless since the beginning of the year which could make it a good value proposition.

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But first, let’s check the financial health of the counter to make sure we are not falling victim to any junk stock. InvestingPro has given a rating of 4 out of 5 which makes it a great performer. After this check, we will look at the valuation gap to get an estimate of how much potential the stock has to rally from the CMP.

Image Source: InvestingPro+

After taking 14 financial models into consideration, InvestingPro has carefully calculated the fair value at INR 5,126.7. This depicts a healthy potential of 9.4% from the CMP, not at all bad for a large cap. In fact, this level was there on the screen last month, so technically, it’s not that hard for the stock to achieve it again.

Now looking at PtoTips for any additional information, we see the stock has paid dividends for 8 consecutive years. The price volatility is also low which is good for low-risk investors who generally have a longer-term view. More importantly, it also suggests that the stock is oversold at current levels, as per RSI. This is important as when oversold stock is combined with a good valuation gap, it makes up for a good trade.

The stock is still falling and traders who can time the entry can further fetch a better price and enjoy a better reward.

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X (formerly, Twitter) - Aayush Khanna

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