Stocks to buy: Value stocks vs growth stocks: Which theme should you bet on?

NEW DELHI: With the Sensex gaining more than 4,700 points from its 52-week low last month, growth stocks have started to outperform in the ongoing rebound on Dalal Street. Market data shows that over the past few months and three months, growth as a theme has recovered quickly after taking the brunt of the recent correction.

Typically, whenever the market is going through a tough time, investors prefer stocks that are trading below their intrinsic value.

Arun Malhotra of CapGrow Capital Advisors says valuations have become reasonable as the time and price correction has occurred. Actions like

and in the financial sector returned to price levels that existed before Covid, while profits increased by more than 40%.

“Many large-cap names are exhibiting this phenomenon and have become cheaper both in absolute terms due to rising profitability and consistent price levels, as well as cheaper in relative terms compared to the broader market. “, he told ETMarkets.

For Alok Agarwal, Portfolio Manager, Alchemy Capital, the mantra is GARP – growth at a reasonable price.

“It’s important to focus on growth, but growth at all costs can damage the health of the portfolio. It is essential to weigh the opportunity for growth with valuation, as well as capital efficiency (i.e. the ability to earn a higher return on the same capital) and balance sheet strength (debt/ equity within reasonable limits),” he said.

However, over the past two years, the value theme has been the most dominant in the market.

Pawan Bharaddia, co-founder and CIO of Equitree Capital, says higher interest rates usually lead to devaluation of private equity which, in turn, triggers a sell-off in high-capital stocks.

“Over the past couple of years, growing companies have enjoyed high PE and the recent sale of some of these growing and new-age technology companies is just a testament to this phenomenon,” he said. said, adding that value games are more likely to do better. go forward.

Axis Securities believes that certain value stocks in the metals, materials, utilities and cement sectors are well positioned to outperform, especially given their recent correction. “While value stocks in the BFSI space have underperformed other themes over the past two months, they are expected to outperform going forward,” the national brokerage said in a recent report.

(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)