Buying the dip? Raja Venkataraman explains what to look for and picks three stocks

What should you consider?

1. Company fundamentals:Look for businesses with solid financial metrics such as consistent earnings, manageable debt levels, and stable cash flows as they tend to weather downturns better than others.
2. Sector trends: Identify industries with long-term growth potential. Sectors such as IT, banking, healthcare, and renewable energy often exhibit resilience and opportunity in the Indian market.
3. Valuation check: Evaluate stocks using metrics such as the price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, and return on equity (ROE). Ensure you're buying at a reasonable valuation compared to the company's historical averages or its peers.
4. Past performance during dips: Analyse a stock's historical behavior during corrections. Companies with a strong track record of rebounding often make for good investments.
5. Market position: Consider companies that are leaders in their sectors, especially those with a competitive edge, innovative products, or a large market share.

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Tips for buying the dip

1. Diversification: Spread your investments across various sectors to reduce risk and capture different growth dynamics.
2. Buy gradually: Avoid committing all your funds at once. Opt for a staggered approach to minimise the effects of short-term market fluctuations.
3. Dividend-paying stocks: Favour companies with consistent dividend payouts. These stocks offer stability and a source of income even during turbulent times.
4. Research and discipline: Focus on making decisions based on data rather than emotions. Stick to your investment strategy and avoid panic-selling.

Raja Venkatraman recommends three stocks to buy during dips

1. Garden Reach Ship Building (GRSE)

A prominent player in India's defense and shipbuilding sector, GRSE offers a compelling investment opportunity. It operates in a priority area under the nation's self-reliance initiative,Aatmanirbhar Bharat, and enjoys a stable revenue stream driven by a robust order book of defense contracts from the Indian Navy and Coast Guard. The company's sound financial health, marked by consistent profitability, low debt levels and efficient operations, further enhances its appeal, as do its reliable dividends.

The stock has been in huge demand and a stellar two-year since 2022 saw it jump 700%, making it a true wealth-creator for many retail investors. The sharp correction in the past few weeks saw minimal profit booking at lower levels, the stock has once again attracted buying interest, as the chart below shows.

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The stock may still be undervalued, presenting an attractive investment opportunity with favorable P/E and P/B ratios relative to peers. With the Fibonacci supports firing in and the Relative Strength Index (RSI) showing a revival from the neutral zone, a new phase may be underway. As a strong long body candle is developing, we can expect the revival to continue. You could consider going long, with a target of ₹2,400 in the next six months.

2. Balmer Lawrie & Co Ltd (BALMLAWRIE)

Balmer Lawrie & Co. Ltd. operates across multiple sectors and has a diversified revenue stream through its presence in logistics, industrial packaging, and chemicals. This makes it resilient to market-wide downturns. The company's focus on logistics infrastructure and the rising demand for industrial packaging in manufacturing and exports serve as key growth drivers.

As a public sector undertaking (PSU), Balmer Lawrie enjoys strong backing from the government of India, which ensures financial stability and helps secure significant institutional contracts, particularly in support of government-led initiatives for infrastructure development and manufacturing growth.

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The stock had been listless until 2023, when it rose aggressively and by the middle of 2024 had doubled from the lows of 2022. A strong surge in volume during the rise underscored increased participation. The recent correction has not been accompanied by rising volumes. Now, with the market showing some signs of recovering, we can see green shoots emerge once again in the stock. Also, a rebound in the RSI from 40 levels that lends some confidence. A resumption of upward momentum could take the stock to ₹222 in the next six months.

3. Greenlam Industries (GREENLAM)

Greenlam Industries is a leading laminate manufacturer worldwide, and holds a commanding position in the Indian market. Its success is underpinned by a strong brand reputation and an extensive distribution network. With increasing urbanisation and robust growth in the real estate sector, the demand for home and office interiors is on the rise, giving Greenlam significant opportunities to increase its market share.

As the chart above shows, the stock rose sharply in 2023 – from ₹300 to ₹600. After that, the stock entered a consolidation phase, retaining the confidence of investors while the market looked for a way ahead. Strong support by the KS line of the Ichimoku managed to arrest the prices several times, as the chart shows. With a strong surge in March, the stock could be entering a bullish phase, with a potential target of ₹985 in the next six months.

Greenlam has demonstrated consistent growth in revenue, robust profit margins, and effective cost controls, which make it resilient in the face of economic challenges. With stable cash flows and well-managed debt, the company has a solid foundation for sustainable performance.

Conclusion

Investing in Indian stocks during dips can be highly rewarding if approached with diligence and strategy. By focusing on companies with strong fundamentals, sector resilience and growth potential, investors can position themselves for robust gains as the market recovers.

Remember, thorough research and a long-term perspective are your best allies in navigating market volatility.

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Raja Venkatraman is co-founder, NeoTrader. His Sebi-registered research analyst registration no. is INH000016223.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.