Stock market weakness may persist; 17 shares to buy based on value, quality screeners

Benchmark stock indices Sensex and Nifty are flat return-wise for the past one year and if one goes by Emkay Global investors, it is time to stay cautious as one approaches the midpoint of Q1FY26 earnings season, with results so far reflecting pedestrian earnings growth.

Emkay Global said uncertainty around the US economy and a lack of visibility on tariffs and trade add to the weakness. Valuation support has diminished, it said adding that the stock market should stay flat-to-weak until there are clear signs of monetary policy transmission and growth recovery. 

The domestic brokerage, however, is confident of an earnings rebound in H2FY26 as it maintained a positive stance on the markets in the medium term. Emkay Global came out with three screeners, which revealed handful of stocks in the brokerage’s focused universe, which offer value or earnings at reasonable prices.   

“We focused on stocks where the FY26-27E average ROIC exceeds the FY21-25 average to identify stocks in a positive profitability cycle. 2) The valuation filter is P/B, which is our preferred metric to assess long-term cyclical stocks, as earnings are volatile and prone to frequent revisions. We have set a five-year LTA as the benchmark and filtered stocks with P/B below this level. 3) We have also set a ceiling of a 20x PER (1YF) to ensure we pick stocks below Nifty valuations,” Emkay said.

“The screener generated seven names – the prominent ones are Tata Motors, Vishnu Chemicals, Mahanagar Gas, and HG Infra,” Emkay Global said. 

In its quality at a reasonable price filter, Emkay Global looked for consistent performers and applied the filters on each year between FY23 and FY27E on the Emkay Coverage Universe. The filters were: i) Core profitability: RoE above 12 per cent; ii) Low cyclicality: EPS growth at 5 per cent-plus each year; iii) Quality of earnings: positive free cash flow (FCF) each year from FY23 to FY27E. It also applied a valuation filter – 1-year forward P/E ratio below its +1SD 5-year historical.

Ten stocks passed this strict set of filters – the prominent ones are: Eicher Motors, Gulf Oil Lubricants, Pricol, and Sun Pharma, the brokerage said.