These three large-cap stocks look cheap. Here's why investors should look closer

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Cheap stocks are companies whose shares trade at relatively low valuations despite having strong businesses, healthy balance sheets and long-term earnings potential. They may be overlooked because of near-term challenges or simply because investors have yet to give them the attention they deserve.

That said, identifying cheap stocks is not an exact science. Valuations are based on estimates and assumptions about future earnings growth, profit margins, interest rates, cash flows and the appropriate valuation multiple.

External factors, including government policy and wars, are also difficult to predict and can weigh on valuations.

For this list, we selected three large-cap stocks that appear relatively cheap compared with peers in the same industry. We compared their price-to-earnings (P/E) multiples with those of peers and also considered whether their return on capital employed (ROCE) and return on equity (ROE) were reasonably healthy.

Investors should consider other parameters as well.

First on our list is ICICI Prudential Life, one of India's leading private life insurers. It is promoted by ICICI Bank and Prudential plc.

The company offers a diversified portfolio of protection, savings, annuity, pension and unit-linked insurance (ULIP) products. Its distribution network spans bank branches, agents, digital platforms and corporate partnerships.

How ICICI Prudential Life compares with peers in the life insurance space

Most large private-sector life insurers trade at P/E multiples well above ICICI Prudential Life, making the stock relatively cheap on this measure.

One reason is recent news that Prudential plc plans to reduce its stake below 10% as part of its acquisition of a 75% stake in Bharti Life Insurance. Under Indian insurance regulations, Prudential cannot hold significant stakes in multiple life insurance companies. The stake sale is therefore primarily a regulatory necessity rather than a reflection of ICICI Prudential Life's business performance.

The news triggered a sharp decline in the stock, compressing its P/E multiple.

However, the development does not point to any deterioration in the company's underlying business. ICICI Bank has reiterated that it will retain its majority stake and continue to support ICICI Prudential Life.

The stake sale is driven primarily by regulatory requirements arising from Prudential's Bharti Life acquisition—not concerns about ICICI Prudential Life's fundamentals.

On the financial front, the company reported value of new business (VNB) of ₹26.29 billion in FY26, up 10.9% year-on-year. The VNB margin rose to 24.7% from 22.8% in FY25. Net profit grew 34.6% year-on-year to ₹16 billion.

Management has said it remains committed to delivering sustainable VNB growth while balancing business growth, profitability, prudence and risk.

One of India's largest private-sector banks, Axis Bank was established in 1993 as UTI Bank and renamed in 2007. It offers a wide range of financial services to retail, business and corporate customers.

How Axis Bank compares with peers in the banking space

Axis Bank trades at the lowest P/E multiple among the private-sector peers considered, making it relatively cheap on this measure.

The bank's total advances grew 6% quarter-on-quarter and 19% year-on-year. Wholesale advances grew 38% year-on-year, SME advances 24% and retail advances 8%.

Gross non-performing assets stood at 1.23%, down 17 basis points quarter-on-quarter and 5 basis points year-on-year. Net credit cost was 0.37%, down 13 basis points year-on-year and 39 basis points quarter-on-quarter.

Management said the bank remains watchful of ongoing uncertainties but is confident of growing in a disciplined and calibrated manner, faster than the industry.

It also said the bank continues to monitor the macroeconomic and geopolitical environment, inflation, liquidity and the cost of funds, along with th...