How to choose and invest in blue chip companies in India ?

On NSE over 7000 thousands companies are listed and among them, its not tough to find Blue chip companies in India. On the basis of market cap these companies  are divided in small cap, mid cap and large cap companies, there is also a category call blue-chip companies, do you know about them, in this article we will discuss about blue chip companies and why you should know about them.

What are Blue Chip companies

Blue chip companies are generally large cap companies; they are financially very strong companies.

Generally they are market leader in their sector, and they sustained from very long time in the market.

With their past performance they have created lots of wealth for their investor.

These companies are enough strong so that , mostly in any crisis or bad condition they are survive easily.

Why are they called Blue Chips?

Where the name Blue Chips cam, there was an American Oliver Gin gold working at US Stock Market in  Dow Jones.

He mostly refers those stocks with the name Blue Chip Stocks which price cross the level of $200.

Later this name blue chip stock gets famous all over the world.

Some people are not agree with this though they say, actually blue chip came from a very famous game Poker, where most valuable chips are referred with name blue chips, and their color is also blue.

So in Stock market is blue chip stock means most valuable stock.

According to Oliver Stocks with high price is generally referred blue chip stock but later investor community referred high quality stocks with name blue chip stocks

List of top blue chip companies in India

Reliance Ind

Reliance needs no introduction. Reliance Industries is an Indian conglomerate holding company.

• It’s headquarters is in Mumbai.
• The company have diversified  businesses in  different sectors across India like energy, petrochemicals, retail,  telecommunications, textiles and  natural resources.
• In India,  Reliance Ind is one of the most profitable companies .
• It is the second-largest publicly traded company in India by market capitalization.
• Reliance is India’s first Indian retailer to cross US $10 billion revenue.
• Reliance ranked #104 position in Fortune Global 500 list.
• Reliance Jamnagar Refinery listed among the world’s top five manufacturing units.
• In private sector Reliance Ind is the highest tax payer company in India.
• As on Sept 2022, Reliance market cap was 15.74 trillion  INR.
• On 29 sept 2022, Reliance Ind share was trading at 2324 INR.

HDFC Bank

•  HDFC Bank Limited is an Indian banking and financial services company which headquartered is in Mumbai.
• It is India’s largest private sector  bank.
• As on july 2022, its market cap crossed 7.70 trillion INR.
• A number of services are provided by HDFC Bank,  which include Wholesale banking, Retail banking, Treasury, Auto (car) Loans, Two Wheeler Loans, Personal Loans etc.
• It is the  third-largest company by market capitalization on the Indian stock exchanges.
• On 29 sept 2022, HDFC Bank share was trading at 1383 INR.

Asian Paint

• Asian paint is India’s largest paint manufacturer company.
• It was founded in 1942, from there this company traveled a long way and not it became India’s largest and Asia’s fourth largest paint company.
• It operates his business in 19 different countries and 26 paint manufacturing facilities available all over the world.
• It service their products to more than 65 countries.
• Asian paint market cap is around 3.26 trillion INR.
• Asian Paints is engaged in the business of paint manufacturing, selling and distribution, coatings, products related to home décor, bath fittings and providing of related services.
• On 29 sept 2022, Asian paint share was trading at 3400 INR.

Hindustan Unilever

• HUL is India’s largest FMCG sector company, which mostly operates in making products include foods, beverages, cleaning agents, personal care products, and water purifiers.
• HUL is basically the subsidiary of a British Dutch Company Unilever.
• In India HUL is doing his business from last 80 years.
• HUL product has access to almost each and every Indian house, I think there would be no any house where HUL product is not used.
• As on Sept 2022 the Market cap of HUL was $78.60 Billion, wchich makes makes HUL the world’s 149th most valuable company by market cap.
• On Sept 29 2022, HUL share was trading at the level of 2703 INR.

Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Walls and Pureit, Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk etc are the top products of HUL.

Nestle India

If you have tested products like Maggi, Nescafe, KitKat, MUNCH, MILKY BAR, BARONE, NESTLE CLASSIC etc, then you would be aware about the company.

These are the product of Nestle India, which is the subsidiary of a Switzerland based company Nestle SA.

• Nestle SA is the world largest food and beverage maker company.
• In India the company was established in 1956.
• In India Nestle India having 8 manufacturing facilities and 4 branch offices.
• Company is continuously improving their operation and understanding the changing lifestyle of India.
• To Understand consumer need regularly improving , Nutrition, Health and Wellness through their products.
• As on Sept 2022 Nestle India market cap was 1.83 trillion INR.

As on 29 sept 2022, the share price of Nestle India was trading at 18,938 INR.

TCS (Tata Consultancy Services)

• TCS is India’s largest IT sector  Company , which operates in  more than 46 countries.
• The company is a Tata group companies and it was established in 1968.
• In recent  data TCS has crossed 6 lakh employees.
• TCS operates in consulting-led, cognitive-powered, integrated portfolio of business, technology, and engineering services and solutions.
• As on sept 2022 , the market cap of TCS was 10.96 trillion INR.
• As on 29 sept TCS share was trading at 2995 INR.

Infosys

After TCS Infosys is the second largest IT company , which headquarters is in Bengaluru.

• Infosys mainly operates  in software development, maintenance, and independent validation services to companies in finance, insurance etc.
• As on sept 2022 , Infosys market cap was 5.87 trillion INR.
•  As on 29 sept 2022, the share of Infosys was trading around 1400 InR.
• Salil parikh is the CEO of Infosys and was founded by Narayanan Murthi.
• Till the end of December 2021,  Infosys has total 276,319 employees .

Sun Pharma

• Sun Pharma is one of the India’s largest Pharmaceutical company, which was established in 1983.
• In starting company have started their business by just 5 products from Bihar and West Bengal.
• Later company extended their business and currently the company having 43 manufacturing units all over the world.
• Globally company have 37000 employee (according to FY22 data)
• company has footprints in more than 100 countries across the globe and is ranked 4th among global specialty generic companies.
• Company mostly operates in therapy areas: Cardiology, CNS Disorders, Gastroenterology, Pain, Ophthalmology, Diabetes, Oncology, Allergy- Asthma etc.
• Caraco Pharmaceutical Labs, Sun Pharmaceutical Industries Inc., Sun Pharma (Bangladesh), and Alkaloida Chemical Company Exclusive Group Ltd, are the subsidiaries of Sun Pharma.
• As on Sept 2022 the market cap of Sun Pharma was 2.23 trillion INR.
• As on 29 sept 2022 , share price of Sun Pharma share was trading around 931 INR.

Bajaj Auto

• Bajaj Auto was founded in 1940 in Rajasthan by Jamnalal bajaj.
• The company manufactures and sells motorcycles, scooters and in three wheelers auto rickshaws.
• The company is in two wheelers and three wheeler space.
• In India Bajaj Auto is the second largest manufacturer of motocycles, where as placed 6 place in world.
• Bajaj Auto’s some famous motorcycles are Pulsar and Avenger and CT 100, Platina, Discover etc.
• In the three-wheeler space, it is the world’s largest manufacturer, which exports around 84% of three wheeler products.
• As on sept 2022 the market cap of Bajaj Auto was 989.33 billion INR.
• As on 29 sept 2022, the share of Bajaj Auto was trading around 3487 INR.

Detailed Video on Bluechip Stocks

Features of Blue Chip Stocks

High Market Capitalization

• Generally Blue chip companies are large cap companies with large capitals.
• Companies having  more than 20,000 crores of capital are under blue chip category.
• In India under  Nifty 50 index mostly listed companies are bluechip companies – like Reliance Ind, TCS, Infosys, Tata motors, HDFC Bank, Bharti Airtel, Sun Pharma etc.
• These are large cap companies as well as referred blue chip stocks.

Consistent and  Stable Returns

• Blue chip stocks are well known for consistent and stable return.
• Blue chip stocks are the more reliable and give robust performance.
• In comparison with small cap and mid companies blue chip companies don’t high return, but you can expect consistent and stable return from them.
•  These stocks are very famous in those investor community who don’t want to take more risk, but they need consistent and stable return.   

Debt Free/ Partial Loan

Blue chip companies are financially very strong companies , they have enough cash flow.

Generally these companies are either deft free, or keep partial debt to save some taxes.

Blue Chip Companies Offer Regular Dividend

• In Investor community blue chip companies are mostly famous for their regular dividend.
• These companies pay regular dividend to their shareholders, quarterly , half yearly or annually.
• The dividend is the profit which companies generates and  reward the shareholders for investing and trusting in them.
• In Small cap and mid cap companies ,Some companies pay dividend  them among their shareholders, or some time they use is to for companies related work , or to acquisition of any company, where as blue chip companies mostly pay the dividend to their share holder in regular basis.
• Its totally depends on the company when they will pay the dividend and how much they pay the dividend.
• Some time in a year these companies pay 2 or three times , if the companies earns good profit.
• For example Coal India is known to give very good dividend to their shareholder.

Blue Chip Stocks for Long-Term Investment

• In you portfolio every one  must add some part of blue chip stock to balanced their portfolio.
• These stock will give you slow and steady growth, but in long term they are very beneficial.
• These stocks will help your portfolio to overcome from market volatility.
• Blue chip stocks are counted as quality stocks, if for any reason market crash, then off course you will see correction in these stocks, but as the market recovers, blue chip stocks recovers its all losses.
• For senior citizens who want to invest in stock market with a limited risk for their portfolio blue chip stocks are good bet.

Blue Chip Shares Carry Comparatively low Risks

• As an investor if we think about growth stocks then , small cap and mid cap stocks provides high growth, but these stocks have very high risk, during market crash, you will observe that these stock fall even 60-70%.
• You can better imagine if any investor has invested for short term and they have picked the stock at high level then what happened with him, especially if he don’t have longer time.
• So it is always suggested for those person always invest in blue chip stocks, these stock have very low risk comparatively small cap and mid cap.

Reliable and  Experienced Management

• Company management plays an important role before investing in any company.
• Suppose you have invested the company like DHFL, Gitanjali Gems etc, then what will happened with your money.
• So before investment you should always research about company management , who is running the company and what is the past record of their management.
• But in case of blue chip companies, these companies run their business from long time in the market, and their continuous growth shows the reliability of their management, how they are running their
• The CFO, CEO, and board of directors of blue chip companies have considerable experience and are known for their expertise in their industry. 

Combined Blue Chip stocks to balanced Portfolio

• It is always advised your portfolio must be diversified.
• According to your age you can balanced your portfolio, if you have started your investment very early then you can take risk and you can add maximum investement in growth stock.
• But If you have started your investment very late then you should balanced your porftollio mostly with blue chip stocks, around 40 +60 % (60 % bluechip stocks ) or 30% + 70% (70% bluechip stocks).

Investing with Blue Chip Funds

• As an investor, you may also think about mutual fund or exchange-traded funds.
• Blue chip stocks are a perfect  fit for young investors who are either interested in defensive advantages of diversification or those who do not time to research.
• Blue chip funds are basically several blue-chip stocks with single security that offers the simplest way to diversify into various high-quality stocks.
•  These investments are also known to be less volatile as compared to individual stocks which are specifically for retired people or nearing retired people.

Advantages of Investing in Blue Chip Stocks India

Less effort to find and invest:  Its easy to pick blue chip stocks to invest, because these stocks are market leader in their sector , and so you can find easily these stocks. In Nifty 50 most of the listed stocks are blue chip stocks.

Diversified Portfolio:

The second advantage to add blue chip stocks in your portfolio is , it balanced your portfolio in a volatile market condition.  So  You must add blue chip stocks  with strong fundamentals and future growth to achieve a diversified portfolio.

 Your asset allocation in the portfolio relies on your risk appetite, if you are a conservative investor who does want to take much risk can allocate most of their capital into blue chip stocks. 

Regular dividend

 The Advantage to invest in blue chip stocks is regardless of market condition, blue chip companies pay regular dividends to their shareholders, which is a great ways to earn passive income. 

Key Points Before Investing in Blue Chip Stocks in India

Growth:

 Like small cap and mid cap companies,  Blue chip companies  don’t  grow as fast .

Sometimes they give a less return than the benchmark index.

 If we take example of  ITC, it has been known for its slow and steady growth.

ITC has  CAGR(compounded annual growth rate) around -3%, which is very low. 

Low returns:

 Blue chip companies have been in business for  long time and they got their maximum growth potential.

So as a investor you should not expect high return similar to small and mid cap stock .

 But it doesn’t mean that in long term they cannot provide good returns.

Expensive:

 Blue chip stocks are more reliable and robust with performance wise , because of that you will mostly find these stocks with high PE ratio.

Means mostly their demand these stocks trades on a high valuation and are relatively more expensive than other securities.

How to invest in Blue Chip Companies in India  

• First if you want to invest in bluechip stocks then the first thing is demat account you must need a demat account to buy any share.
• Second thing is before choosing the bluechip stock you should do some research.
• If you don’t have time or you cann’t do research by your self then you can take the help of mutual fund.
• In that case you have to invest in that mutual fund who directly invest in Bluechip companies.

Who Should Invest in Blue Chip Stocks

Most of the investor don’t want to keep bluechip companies in their portfolio, the reason is their low return, but if you are a person who don’t want to take high risk in share market then blue chip stock is the best investment idea for you.

How ever comparatively growth stock these bluechip stocks growth rate is lower but here your capital will be safe,  some investor want more safety then they invest in bonds also , which return is more lower than bluechip stock.

If you investment criteria is for small term, then you should not invest in blue chip stock. For long term 8 to 10 years time period, blue chip stocks have given good return.

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