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8 Best Blue Chip Stocks to Invest In

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8 Best Blue Chip Stocks to Invest In

Introduction

Indian equity markets have witnessed almost two-fold growth since the March 2020 lows and are currently standing near the all-time highs. Midcaps and small-caps have turned into multi-baggers and have given manifold returns to the investors.

At current levels in the Indian equity markets, investors who prefer to hedge their risk can potentially turn to blue-chip stocks.

What are Blue-Chip Stocks?

Blue-chip stocks are stocks of companies that are generally market leaders in their segment (market capitalization > Rs 50,000 crore), having sound balance sheets, sound finance, strong management, minimum/no debt and a Has a certified sales performance record. These companies have really high brand value and are generally well known names across the country for providing quality products/services by them. These blue-chip investments carry low risk with stable returns and having faced several economic downturns in the past, these companies have proven that they can continue to grow with profitability, irrespective of market conditions. Blue-chip investing is best for those who generally have a low risk profile but also want their money to be a compounding machine.

Let’s Take a Look at The Best Blue-Chip Stocks in India:

Reliance Industries Limited: Sector: Oil & Gas

Reliance is the largest publicly listed company in India in terms of market capitalization. The company was initially in the petrochemical business (exploration, refining, marketing and distribution of petroleum and its allied products), but with the advent of Reliance Jio and Reliance Retail, the company is now a conglomerate of multiple divisions such as retail, telecommunications and space technology. working in.

In FY21, the company recorded a revenue of Rs 466,924 crore with a net profit of Rs 53,223 crore. Reliance Industries’ core cash flows are driven by a strong oil and gas division, but its other ventures ensure a platform for diversification and achieving steady growth for the coming fiscal. Reliance managed an equity return of 7.01% in FY21 despite the market being down due to the coronavirus pandemic and consequently pressure on the oil and gas business. The company has also successfully become a debt-free company and this was largely due to the value added by its other business verticals.

The company has extensive expansion plans in retail, telecommunications and space technology that will create value going forward. The company aims to achieve carbon neutrality by 2035, while focusing on the energy business and at the same time maintaining continued investments in its oil and gas business.

Asian Paints:  Sector: Paints

The company enjoys a major market share of about 50% in the domestic paint industry and more than 70% market share in the organized paint industry. The company has an extremely strong distribution network which is almost impossible to replicate and has a wide range of products with extremely high brand demand for the customers.

In FY21, the company recorded a revenue of Rs 21,712 crore and a net profit of Rs 3,178 crore. The EPS has been on a steady rise from Rs 20.22 per share in FY 2017 to Rs 32.73 in FY 2021 and the company has been able to see return on equity at 25% continuously for the last five financial years.

The company’s already existing large product range still has huge room for growth, with expansion strategies to incorporate new products into its group composition and move beyond manufacturing and supply to provide a complete home decor experience. Chances are. A big reason they have consistently been market leaders and will continue to do so is the added benefit of focusing on their core niche market rather than unnecessary vertical expansion of the business.

Avenue Supermarts (D-Mart): Sector: Retail

Avenue Supermarts is a blue-chip stock that owns and operates D-Mart stores. D-Mart stores are retail chains offering a wide range of grocery to home and personal care products under one roof. The company does not operate on a rental model and operates on a greenfield model and is the owner of every store it operates. D-Mart operates 221 stores in 11 states of the country. The company works on really strong cost-controlled measures with strong buy-in capability which helps them to list their products at a really competitive price. This leads to its high inventory turnover and increased profitability.

As of FY21, it had a revenue of Rs 24,870 crore with a net profit of Rs 1,300 crore. There has been a steady increase in EPS from 8.49 in FY2017 to 20.71 in FY21. A major cause for concern would be the fall on equities as the ROE which was 17.26% in FY18 has fallen to 9.02% in FY21. Since the company operates on a proprietary model, the company cannot leverage multiple stores and increase its access points to increase its customer base, but the company has the potential to grow organically due to the largely untapped market. is headed towards.

HDFC Bank: Sector: Banking

HDFC Bank is a leading private sector bank in the Indian banking industry. The bank is the leading lender in the retail loan segment which is driven by car, home and personal loans and credit card business with steady growth in market share. With India being a young country in terms of average age of population, the bank is poised to leverage that advantage and drive its growth due to a strong presence in the retail loan segment.

The company’s FY21 revenue is Rs 1,28,552 crore and net profit has doubled to Rs 31857 crore in FY21 from Rs 15,287 crore in FY17. The company has been able to see a return on equity of more than 15% for the last five consecutive financial years. The company has a strong debt book of Rs 11.3 lakh crore with a growth of 13.9% on a year-on-year basis.

HDFC Bank is a one-stop solution for all financial needs of an individual in a growing economy and with a healthy balance sheet and revenue growth guided by strong management, which focuses on asset quality, which is the key to all organic and inorganic growth. Take advantage of the opportunities that lie ahead of them.

Larsen and Toubro Sector: Heavy Engineering

Larsen & Toubro is India’s largest infrastructure and heavy engineering company and stands with huge order book of Rs 3274 crore in FY21. Such high-ranking books indicate high revenue potential in the near future. The company is diversified into multiple segments such as power, infrastructure, heavy engineering, defense engineering, hydrocarbons, financial services, IT and reality.

The revenue for FY 2021 is Rs 135,979 crore with a net profit of Rs 4668 crore. Net profit declined from Rs 10,167 crore in FY20 to Rs 4668 crore in FY21 after a major part of the year was lost to the pandemic. The company still managed to post an EPS of Rs 82.49 per share, with a return on equity of around 15.26%.

With huge order book and diversification into several non-correlated businesses, given that spending on infrastructural activities is going to be one of the biggest elements in the government’s budget, the company has great potential to unlock value.

Maruti Suzuki Sector: Automobiles

Maruti Suzuki India Pvt. Ltd. is one of the largest and oldest automobile manufacturers in India. The market is dominated by the company with around 50% market share in the passenger car market segment. The automobile market has been confined for a few years but with the revival in demand, Maruti will emerge as its biggest beneficiary.

The company’s revenue declined from Rs 75,660 crore in FY20 to Rs 70,372 crore in FY21. The profitability figures saw a big hit as it declined 43.6% to Rs 4220 crore from FY19 to FY21. Similarly, EPS has also come down from Rs 253 in FY19 to Rs 145.3 in FY21. Lower margins and sales figures could see revival once demand picks up.

The pandemic created a reduced demand for the automotive industries as the focus shifted from luxuries to necessities. With the rollout of mass vaccination and unlocking of the economy, there may be a revival in demand in the automotive segment. Compared to industry peers, Maruti Suzuki is priced at a fair price for earnings of Rs 49.76 while its relative market price of Rs 69.52, hence gives Maruti Suzuki a lot of room to grow.

Hindustan Unilever Limited: Sector: FMCG

Hindustan Unilever is one of the oldest FMCG companies in India with a proven track record of more than 80 years. The company manufactures a wide variety of products ranging from food and beverages, cleaning agents and personal health care products. The company’s products have high brand recall and brand visibility which is reflected in its financial performance. The company’s twelve products generate an annual turnover of over Rs 17,000 crore for the company.

The revenue has seen a steady growth from Rs 33162 crore in FY17 to Rs 47028 in FY21, supported by an increase in profitability to Rs 8000 crore in FY21. EPS has increased from Rs 20.68 in FY17 to Rs 34.03 in FY21. The company has no debt on its balance sheet and has several brands within which the company’s products are market leaders. Brands like Axe, Lux, Dove, Knorr, Lipton, Lifebuoy, Surf Excel, Rin, Vim and Ponds are recognizable brand names in every household in the country.

HUL’s strong financial and brand value helps it maintain its leadership position in the domestic FMCG market and the company’s ability to weather any economic downturn/crisis makes it an all-time blue-chip investment to make.

Housing Development Finance Corporation (HDFC): Sector: Housing Finance

Housing Development Finance Corporation (HDFC) is the leading housing finance company in India with a wide distribution network. The company has diversified into Banking, Asset Management, Life Insurance, General Insurance and Real Estate to build a strong base for future growth.

The company’s revenue has doubled to Rs 139033 crore in FY21 from Rs 61,034 crore in FY17, but profit has seen a decline of 20.5% from Rs 17,080 crore in FY20 to Rs 13,566 crore in FY21. , The result of the decline in profitability can also be seen with a decline in EPS from Rs.124.14 in FY20 to Rs.105.59 in FY21.

HDFC is known for its management performance record, adequate capitalization level, strict underwriting standards, high asset quality and diversification in various allied sectors, which will help the company grow, while keeping the debt to equity ratio in check. It has to be kept under control and adhered to so that the quality of the asset does not deteriorate further.

Conclusion:

Blue-chip stocks are among the best companies to invest in, have a long-standing record of performance and delivery of returns and still have the potential to grow. These companies contribute significantly to the development of the nation as a whole and are also important for the development of the nation. Hence, the risk associated with these blue-chip stocks is very low and at the same time, can provide consistent returns in future.

About the Author- Gaurav Heera is a stock market analyst & trainer with many years of experience in the field. He also heads DelhiCourses, an institute known for its best Technical Analysis Course in Delhi.

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