Looking for the Blue chip Stocks to buy in India for long term Investment which may give a steady return with minimum risk? Here we will discuss,
- What is Blue chip Stocks?
- Characteristics of Blue chip Stocks,
- Top 10 Blue chip stocks to buy in India,
- Points to consider while investing in blue-chip stocks.
What is Blue chip Stocks?
Blue-chip stocks are referred to those stocks which are financially healthy and well-established companies or stocks. Usually, the blue-chip stocks have a record to provide satisfactory returns to the calm investors who stay invested over the long haul. There are various factors that lead a company to become a blue-chip stock. A Blue chip stock has the following features,
- Blue-chip stocks have acquired a significant market share in the sector.
- Generally, a blue-chip stock is a large and well established.
- Blue-chip stocks have experienced a number of bear phrases, a market downturn, financial troubles, etc., but since they are survived they are still going strong.
- Whatever product or service the company offers is of high quality and has satisfactory customer service.
- Due to the business model, revenue-earning it can be expected that these companies will not face problems generating revenue.
- A blue-chip company is a financially healthy one. It means the company has a huge capital to run its business operations.
- During the course of time, the stock has been able to create a popular and strong brand value in the market.
- The most vital thing for the investors is that blue-chip stocks pay high dividend payments to the shareholders.
- They are the leaders in their respective sectors and have a significant market share and maintain a strong balance sheet. Therefore, blue-chip stocks have pricing power.
- When the market corrects blue-chip stocks remain stable. This stability in share price is the biggest benefit of blue chips. If in any situation their price falls, this fall is slower and recovers again soon.
What are the characteristics of Blue chip Stocks which will yield steady returns in the long run?
Apart from the above-mentioned characteristics here are the basic features of blue-chip stocks,
Large Market Capitalization – Since blue-chip stocks are the leaders in their respective sectors they have a market cap of Rs. 20k Crores.
Robust performance in the past – They have delivered a robust Revenue or net sales growth, Net Profit growth, Earnings per Share growth at the rate of 10%, in the past.
Debt-free status – The majority of blue-chip stocks are either debt-free or have a marginal debt ratio between 0 and 0.25.
Healthy dividend Payout – The blue chips companies pay a healthy dividend to its shareholders.
Competitive advantage – Since the blue-chip stocks are the market leaders they have a sustainable competitive advantage. The competitive advantage accelerates the company’s sales margin which increases profit margin than its competitors i.e., peer companies. Blue-chip stocks have a sustainable competitive advantage with respect to cost structure, brand reorganization, corporate reorganization, product quality distribution network, and superior customer support.
- Read also: Blue-Chip Stock – Investopedia
Top 10 Blue chip stocks to Buy in India
Here are the top 10 blue-chip stocks to buy which enable better returns in the near future,
Asian Paints was incorporated in the year 1945. It operates in Paints and Pigments sector. The Company is engaged in the business of manufacturing, selling and distribution of paints, coatings, products related to home decor, bath fittings. It also provides related services. Asian Paints is India’s largest and Asia’s fourth-largest paints company. Its Key Products/ Revenue Segments include Paints, Enamels, and Varnishes& Black.
Here are the key aspects of Asian Paints.
- Asian Paints has performed a satisfactory growth of around 8% to 12% during the past 5 financial years.
- Its business is double the size of any other paint company in India.
- The company has spread its business in 19 other foreign countries and has 26 manufacturing units around the world.
- Asian Paints serves in over 65 countries occupying the position of fourth largest paint company in Asia.
- Asian Paints operates in different segments like Industrial coatings, Decorative paints, Ancillaries, Asian Paints Royale, etc.
- The company holds a wide brand value.
- Asian Paints always conducts attractive and good marketing campaigns. Many renowned celebrities promote Asian Paints from time to time.
Bajaj Finance was incorporated in the year 1987. It operates in the Finance sector. The Company is engaged in the business of providing loan facilities for buying two and three-wheelers, consumer durables, small business loans, personal loans, mortgage loans, loans against securities, etc. at an affordable interest rate. Here are the key aspects of Bajaj Finance,
- You can get easy loans at affordable interest rates from any vehicle stores or shopping malls with a pan India network.
- Easy EMI option is available.
- Less documentation at the retail shop in comparison to banks.
- A strong relationship with the public which attracts more revenues.
Bajaj Auto was incorporated in the year 2007. It operates in the Automobile sector. The Company is engaged in the production of motorcycles, passengers’ vehicles, goods carriers. Bajaj Auto is the fourth largest two and three-wheeler auto manufacturer of the world. Here are the key aspects of Bajaj Auto,
- Bajaj Auto maintains a good brand value. At present-day Bajaj Auto is the most recognized brand name in the two and three-wheeler segments. Some famous brands of Bajaj Auto in the two-wheeler segment are Pulsar, Avenger, Platina and CT 100.
- Now in India the market share of the Bajaj Auto in two-wheeler segments is 14%.
- Since the company has manufactured a wide variety of two and three-wheeler vehicles, this will help the company to cater to a wide variety of consumers by delivering vehicles in accordance with the consumers. This helps the company to maintain sustainable business growth.
- Bajaj Auto has a vast distribution network as well as service centers all over the country. Take any semi town or suburban area, you can easily find a service center as well as the showroom of Bajaj Auto. This vast distribution network enables the company to meet the increasing demand for vehicles.
Britannia Industries Limited
Britannia Industries Limited was incorporated in the year 1945. It operates in the FMCG sector. The Company is engaged in the business of Bakery Products i.e. Biscuits or Cake. Britannia is an old and famous company that produces bakery items. It has been producing bakery products since a century ago. Its products are available for all income groups. The company has something to offer almost everyone. So, the company occupies the largest portion i.e. 30% of the bakery market in the country.
The one and the first name people think about biscuits, cakes, bread, Rusk or the dairy products in India is Britannia. Due to its vast range of products and their quality, Britannia holds a recognized position among people. Britannia has reached every nook and corner in the country. The Britannia will continue its immense growth owing to the following factors,
- Low operational costs,
- Presence of established distribution networks in both urban and rural areas across the country,
- Wide ranges of products which cater to the needs of the people enable Britannia a sustainable competitive advantage,
- Owing to health awareness, increase in disposable income is the positive aspects because this enables to increase the market share in the category of healthy food products.
HDFC Bank was incorporated in the year 1994. This is the second-largest bank in the private banking sector. The HDFC Bank will continue its immense growth owing to the following factors,
- By offering various services namely deposit of money, insurance services i.e. health insurance, term insurance, loan facilities, investment opportunity i.e. either direct equity by opening a Demat account or via a mutual fund, payment of utility bills namely electricity bills, municipal taxes, income tax, etc. HDFC bank has maintained a sustainable competitive advantage.
- Various awards and recognition from the financial rating institutions increase the brand value of the bank.
- HDFC bank maintains better asset quality parameters i.e. Non-performing assets, in respect of PSU banks, this enables profit growth in the future.
- HDFC bank maintains better customer satisfaction in comparison to public sector banks.
- Large manpower with relevant banking skills to manage the operations thereby increases the Productivity and Profitability of the bank.
Maruti Suzuki was incorporated in the year 1981. This company is still growing and this growth will continue in the near future on the wings of economic development, continuous product innovation, technological advancement i.e. electric vehicle, alternative fuel such as shell gas, CNG and use of renewable sources of energy such as solar power, wind energy and increase in demand of luxury commercial vehicles in developing countries like India. Some well-known brands of Maruti Suzuki are Celerio, Swift Dzire, Baleno, S-Cross and Vitara Brezza, etc.
The Maruti Suzuki will show immense growth owing to the following factors.
- Maruti Suzuki maintains good brand value. At present-day Maruti Suzuki is the most recognized brand name in the Indian market. Now everyone understands four-wheeler means it is Maruti.
- With the increasing disposable income owing to the economic progression, the demand for luxury commercial vehicles will increase year on year.
- The advent of Electrical vehicles & alternative fuel such as Shell gas, CNG and use of renewable sources of energy such as solar power, wind energy have reduced the fuel cost thereby increasing the demand for vehicles.
- Assistance from the Government to set up manufacturing plants to boost the economy.
- Availability of a good technology base at low cost.
- It continuously produces cars at a low price like Maruti Suzuki Omni, Maruti Suzuki Alto, etc.
- Buys new equipment to lower production cost and time.
- Maruti Suzuki has recently launched various SUVs to enter in the other segments. These models are giving tough competition to existing companies and are expected to succeed.
- Maruti Suzuki exports cars to American and UK markets. This will boost revenue as well as profit margin in the upcoming future.
Pidilite Industries was incorporated in the year 1969. The company operates in the Chemicals sector. Pidilite Industries is an Indian-based adhesives manufacturing company. It is basically an adhesive item producing company. It also sells art materials, construction chemicals, and other industrial chemicals. Pidilite produces some famous products like Fevicol, Fevikwik, Dr.Fixit, M-seal, Roff, Cyclo, Hobby Ideas, Acron and Ranipal. Here are the key features of Pidilite Industries.
- Pidilite industries maintain good brand value. At present-day Pidilite industries is the most recognized brand name in the Adhesive sector. Some famous brands of Pidilite industries in the two-wheeler segment are Fevicol, Fevikwik, Fixit, M-seal, etc.
- Owing to the flagship brands Fevicol, Fevikwik, Fixit, M-seal, helps to achieve the market leader in the adhesive sector. The market share is Pidilite industries is approximately 68% in the adhesive sector.
- Apart from the adhesive industry, the company offers a wide range of chemicals such as Sealants, construction chemicals, resins, waterproofing solutions.
- Presence of established distribution networks in both urban and rural areas across the country to meet the demand of the above-mentioned products.
Reliance Industries was incorporated in the year 1973. It operates in the Petrochemicals sector. Needless to say, Reliance Industries become the first Indian company to achieve the $100 billion market capitalization. This company is also the highest income tax payer in the private sector companies in India. Here are the key features of Reliance Industries.
- RIL has expanded its footstep in Textile, energy, retail, etc. apart from its core business petrochemicals i.e. oil and gas. Recently it has entered the telecom industry by introducing JIO.
- Reliance Industries maintains a good brand value. At present-day Reliance is the most recognized brand name in the petrochemical, telecom segment. The most famous brand of Reliance Industries in the telecom segment is JIO. Reliance JIO has an excellent service for 4G wireless service throughout the country which enables a sustainable competitive advantage.
Tata Consultancy Services Limited
Tata Consultancy Services Ltd. was incorporated in the year 1995. The company operates in the Information Technology sector. Tata Consultancy Services Ltd. offer digital solutions, Machine-to-machine solutions, business process services, development and maintenance of IT software, business intelligence, etc. The company establishes a partnership with technology giants such as Dell, Amazon, and HP, etc. Tata Consultancy Services will continue its immense growth owing to the following factors,
- TCS is the big bull in the information technology sector because it has a footprint in North America, UK, Middle East Europe, Asia-pacific, etc. This global network creates a brand value for TCS.
- TCS provides technological support to various industries or sectors such as Banking, Financial services, retail, telecom, media, and entertainment. This diversification reduces the risk of overdependence on a single industry or sector.
- Owing to the IITs and NITs large skilled professionals are available who can adapt themselves to advanced technologies with ease.
- Government initiatives such as stringent copyright act, Technologies Park, smooth implementation of corporate governance, building infrastructure i.e., hi-tech building to accommodate the software companies and their staff too.
- Highly skilled professionals with low wage structure in comparison to international markets.
- The export of software, as well as the domestic demand in the recent past, has been consistently growing. The best example is online exams for government jobs as well as private jobs.
Titan Company was incorporated in the year 1984. It is a Large Cap company operating in Consumer Durables sector. Titan Company is the fifth-largest integrated own brand watch manufacturer in the world. Titan launched ‘Sonata’, India’s largest selling watch brand, which has established itself as a brand of great quality and unbeatable value for the customer. After Sonata, Titan Company launched Fastrack in 1998 and became an independent urban youth brand in 2005. The brand has carved a niche for itself within categories such as watches and eyewear amongst the youth.
In 2009, Fastrack extended its footprint into accessories with a range of bags, belts, and wallets. Titan Company launched ‘Tanishq’, India’s most trusted and leading jewelry brand. Titan Company operated via 1400 stores and a total retail area of over 1.8 m sq.ft. all over India. It has India’s largest specialty retail network over 240 towns. Today, Titan Company Limited is TATA’s largest company operating in consumer durables. It is India’s leading producer and retailer of watches, jewelry, eyewear, and accessories. Titan will continue its immense growth owing to the following factors,
- It has a vast retail network namely ‘World of Titan’.
- You will found quality watches at an affordable rate.
- Titan maintains a good brand value. At present-day Titan Company is the most recognized brand name in the Indian market.
- By introducing the waterproof watches titan has entered in the other segments of watches.
- Titan has tied up with Hugo Boss and Tommy Hilfiger which enable market entry in other countries.
- A strong relationship with the public which attracts more revenues.
Points to consider while investing in blue-chip stocks
Okay, the above discussion sounds good about blue-chip stocks. But the investors should handle blue-chip stocks with care and resort to some precautions.
- Time does not remain in one’s favour forever. No company or stock can remain at the pick all the time. We can take the example of reliance communication, DLF, Kodak, Nokia, Lehmann Brothers, etc. they were once blue-chip stocks and enjoyed a monopoly in the market. But now they are either dead or dying. The lesson is you as a smart investor should check the fundamentals of blue-chip stocks occasionally.
- People have a conception that blue-chip stocks will generate a good return in long term irrespective of their price overvalued or undervalued. Blue-chip stocks mostly trade on overvalued prices. They have a high demand. But the overvalued price may turn in a negative way. So, an investor should check the value of the stock on the basis of its fundamentals, and then proceed.
- Blue-chip stocks are the leaders in their respective sectors. So, people take them as treated as risk-free. But the stock market may collapse suddenly like 2008-09. In that case, the blue-chip stocks will also suffer a fall in their price. So, don’t put your all money in one or two blue-chip stocks only. You may rather diversify your portfolio among large-cap, mid-cap, small-cap stocks.
- Blue-chip stocks are big matured ones. So, their future growth is not skyrocketing during their initial days. First of all, an investor should consider his goal. If he wants steady returns then he may invest in growth stocks along with blue-chip stocks.
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You should safeguard yourself from the above-discussed precautions or limitations of blue-chip stocks to get better returns from your investment over the long term. Hope this article helps you to pick the best blue-chip stocks which enable better returns in the long term. If you have found any questions feel free to comment so that we can have a discussion. If you have found this post helpful feel free to share with your loved ones.