Last Updated – Sept 2022
In this article, we will cover
What are Blue chip stocks?
The blue-chip stocks to buy are stocks issued by financially sound and fundamentally strong blue chip companies with humongous market capitalisation and enviable market reputation. Blue Chip companies refer to equity shares of companies with larger market capitalisation. These companies have entrenched market operations running for many years. The best blue-chip shares to buy now usually are stocks of the bellwethers and trailblazers, currently occupying the highest ranks of any industry.
Given the large size, a Blue Chip company is easily recognisable and financially stable with a large distribution network. These companies typically sell quality products and services that are widely accepted across the country. Because of these qualities, such companies are more resilient to economic downturns. They may continue to grow or operate profitably, even in adverse market conditions. And this is one of the reasons these companies are relatively less sensitive to wide market fluctuations when compared to Mid Cap and Small Cap companies.
Blue Chip companies are stalwarts in their own industry and belong to the mature lot on exchanges. The term ‘Blue Chip’ originates from the round of poker where the blue colored chips are relatively more valuable. Similar to the game, these stocks which are more valuable in the market and hence are termed Blue Chip stocks.
Characteristics of Blue chip Stocks:
Blue Chip companies are large and pretty well-established, having a history of consistent performance. The best blue-chip stocks to buy have an enticing history of providing consistent returns to the shareholders in the form of considerable dividend payouts at regular intervals of time. Hence the best blue-chip stocks to buy have a glorious history of attractive returns and reasonable growth in the value of the share even in times of economic doom. Hence, we have dissected the history of the blue-chip companies and undertaken extensive analysis of past performance, in conjunction with the economic environment and duly prepared a list of best blue-chip shares to buy now.
These companies are financially resilient with negligible to zero debt levels and are capable of surviving turbulent economic situations. Most of the best blue-chip stocks to buy are market leaders in their respective industries.. Further, it is often seen that a Blue Chip business is less affected by unfavorable financial conditions during recessionary periods.
Investing in Blue Chip stocks is recommended for investors with a conservative risk profile to meet their long term goals of at least 5-7 years. But investing in these companies is ideal for all investors to grow their wealth over a long period without exposing themselves to a lot of risk and volatility. Some portion of an investor’s portfolio can always be exposed to blue chip stocks for stable less risky returns.
The blue-chip stocks to buy are stocks of well-diversified companies having multiple sources of revenue. Hence, the losses suffered by one channel are mitigated by the profits earned in another medium. Therefore, it allows the investors to diversify the associated risks in investing in blue-chip stocks as the companies have spread their tentacles in different sectors and industries. This not only serves as a cushion against losses suffered by one sector but also provides resilience in times of operational setbacks.
Apart from the characteristics discussed above, an investor must keep a few key financial characteristics of blue chip companies in mind before investing. Most Blue Chip companies in India have market capitalization greater than Rs. 50,000 Crs. These companies have a track record of consistently increasing their topline and operating margins on an upward trajectory. They are generally debt free companies, however, a low and stable debt to equity ratio may also be considered as a significant characteristic. Blue Chip companies are known for rewarding their loyal shareholders with consistent and increasing dividends. Also, these companies should have a high return ratio (both return on equity and return on capital employed), high interest coverage ratio, ability to consistently generate cash flows, etc.
List of Best Blue chip Stocks to buy now in India
|Sr. No.||Company Name||CMP (Sept 2022)||BSE Scrip Code||NSE Symbol||Rating||Industry|
|1||Reliance Industries Ltd.||2,564||500325||RELIANCE||2||Crude Oil|
|2||Tata Consultancy Services Ltd.||3108||532540||TCS||5.0||Information Technology|
|3||Hindustan Unilever Ltd.||2564||500696||HINDUNILVR||5.0||FMCG|
|4||Infosys Ltd.||1433||500209||INFY||4.5||Information Technology|
|5||Housing Development Finance Corporation Ltd.||2460||500010||HDFC||3.0||Finance – Housing|
|6||Bharti Airtel Ltd.||785||532454||BHARTIARTL||0.5||Telecom|
|8||Asian Paints Ltd.||3397||500820||ASIANPAINT||3.0||Chemical – Paints|
|9||Nestle India Ltd.||16775||500790||NESTLEIND||5.0||FMCG|
|10||HCL Technologies Ltd.||922||532281||HCLTECH||4.5||Information Technology|
|11||Maruti Suzuki India Ltd.||9198||532500||MARUTI||2.0||Automobiles & Ancillaries|
|12||Larsen & Toubro Ltd.||1964||500510||LT||0.5||Infrastructure|
|13||Titan Company Ltd.||2652||500114||TITAN||0.5||Diamond & Jewellery|
|14||Britannia Industries Ltd.||3728||500825||BRITANNIA||4.5||FMCG|
|15||Bajaj Auto Ltd.||3790||532977||BAJAJ-AUTO||5.0||Automobiles & Ancillaries|
|16||Eicher Motors Ltd.||3633||505200||EICHERMOT||4.5||Automobiles & Ancillaries|
|17||Dr. Reddys Laboratories Ltd.||4164||500124||DRREDDY||1.0||Pharmaceuticals & Drugs|
|18||Avenue Supermarts Ltd.||4521||540376||DMART||4.0||Retailing|
|19||Pidilite Industries Ltd.||2895||500331||PIDILITIND||4.0||Chemical|
|20||HDFC Bank Ltd.||1529||500180||HDFCBANK||5.0||Bank – Private|
|21||Kotak Mahindra Bank Ltd.||1943||500247||KOTAKBANK||5||Bank – Private|
|22||ICICI Bank Ltd.||921||532174||ICICIBANK||4||Bank – Private|
|23||Axis Bank Ltd.||796||532215||AXISBANK||1||Bank – Private|
Reliance Industries Ltd.
Reliance Industries is India’s largest company.The company is primarily engaged in the business of oil exploration, refining of petroleum and marketing & distribution of the same along with operations in petrochemicals. Reliance has diversified further by foraying into the retail, telecom and technology space with Reliance Retail and Reliance Jio, respectively. With all the businesses combined, the company pulled in revenues of over Rs. 699962 croresin FY22 partly on the back of increased Jio subscriptions and crude oil volatility. A majority of the company’s cash flows come from the oil sector, but it has been aggressive in diversifying into companies that may help it achieve rapid growth and utilize its size in the proper sequence while mitigating the risks associated with the oil business. The company has plans to achieve carbon neutrality by 2035 thereby focusing on diversifying across energy and other industries while continuing to invest in the oil business.
The year witnessed constant increase in oil prices benefitting the company as it delivered a ROCE of 9.63% for FY22. despite the pressure on oil companies globally affecting their margins. Reliance is among the most efficient among peers with the highest gross refining marginsat $5.7bbl (barrel) while the refining throughput stood at 71.9 MMT. The company has proven oil reserves of 10.22 MMT in India and abroad along with proven gas reserves of 113,591 MMSCM in India and abroad as of FY21. Oil and Gas business turnaround with 7-year high EBITDA – KGD6 production ramped up to >18 MMSCMD. It’s Jio business witnessed healthy traction with data traffic 91.4 bn GB, up 46% YoY; Voice traffic 4.51 trillion minutes, up 18% YoY.
The company currently has an EV/EBITDA of 16.6xand a PE ratio of 31.3x which values the company fairly given the efficiency in oil business vs. peers. The company announced that it will invest Rs. 75,000 crores in its New Energy business over the next three years. The stock is expected to offer diverse growth opportunities over the long term. Along with this, the company has Reliance Jio and Reliance Retail among other digital investments which have been effectively contributing to the margins and growth of the company. Reliance has also successfully raised about Rs. 2 trillion by Jio stake sale, BP stake sale and a rights issue. It had purchased Future retail, however, due to a legal feud with Amazon, the deal got cancelled.
Tata Consultancy Services Ltd.
Tata Consultancy Services Ltd is the largest IT company in India by Market cap and the world’s largest IT Services provider. The company is involved in providing a wide spectrum of services such as IT Services, Consultancy, business solutions, digital transformation, and IT products and platforms. The company is also foraying into newfound and developing technologies such as cloud-based computing, machine learning, AI and Blockchain-based technology. Its majority revenue segment is BFSI which forms about 31% of the total revenue pie for the company followed by Retail and CPG, Communications, Media and Tech, Manufacturing, Life Sciences and Healthcare and Energy and Utilities among Public and Others. TCS’ major revenue generation is from North America contributing to about 52.2%, UK around 31.9% while India is the least at 5.1%.Other markets contributed 10.8% of the portfolio.
The company has a proven track record which is reflected in the company’s financials as it has been delivering industry leading results such as 5-year average RoE of 37.2%; an operating profit margin of 28.10% and high cash flow generating business with cash flow from operating activitiesat Rs 39,949Crs. TCS has also seen consistent growth with revenue growing at a CAGR of 10% over the last 5 years while the net profits saw a 7% CAGR for the same period.
The company has delivered strong financial performance, the stock carries premium valuations vs. its peers at a PE ratio of 032.1 times vs. industry average PE ratio of 26.3times. While the PE ratio is higher, the premium is justified as TCS has also delivered industry leading growth and returns for shareholders, making it attractive at the price offered. Digital transformation deals are no longer discretionary as clients continue to spend, despite their sector being in economic down-cycle.
A key risk for the company lies in the fact that the company may not be able to deliver growth at a similar pace as in the past, thereby taking away the premium valuations the stock commands and impacting the share price negatively.
Hindustan Unilever Ltd.
Hindustan Unilever Ltd. (HUL) is one of the largest Fast Moving Consumer Goods Companies in India with a heritage of over 80 years. Five of its brands generate annual turnover of over Rs. 2,000 Crs each and 7 brands generate annual turnover of over Rs. 1,000 Crs each. HUL caters to a variety of product range which includes foods, beverages, cleaning agents, personal care products, and water purifiers. A few famous brands have high visibility and sustained market leadership which is backed by an extensive distribution network and a strong advertising and marketing campaign. HUL has been leveraging its distribution strengths to adapt its channel strategy for its products and market segments. On a consolidated basis, the financial risk profile is supported by strong net cash accrual and no outstanding debt as on March 31, 2021.
The company has ample liquidity which is indicated by cash and cash equivalents balance of Rs. 3,846Crs as on March 31, 2021. HUL is known for its aggressive dividend payout policy which is around 90%. The Indian FMCG industry is corroborated by both organized and unorganized players across segments and products and HUL continues to face stiff competition with the entry of new players including multinationals in all its major segments such as soaps and detergents, personal care products and packaged foods.Apart from this, the company has witnessed problems impacted from crude oil volatility. However, HUL’s strong financial risk profile and its leading position in the domestic FMCG industry would help to maintain its leadership position and tide through any economic slowdown/ crisis.
Housing Development Finance Corporation Ltd.
Housing Development Finance Corporation Ltd. (HDFC) is the market leader in the housing finance industry in India with a strong distribution network comprising 675 outlets. HDFC is known for its long-standing track record of operations, adequate capitalization levels, strong resource raising ability, strict underwriting standards, risk management procedures and healthy asset quality amidst some moderation in the previousyear. Recently, an announcement was made to merge HDFC Ltd, with HDFC Bank. Post this merger HDFC will acquire 41% of HDFC bank.
The shareholders of HDFC Limited as of the record date will receive 42 shares of HDFC bank for 25 shares of HDFC limited. HDFC Limited’s shareholding in HDFC Bank will be extinguished and HDFC Bank will be 100% owned by public shareholders.HDFC has proved its vast marketing as well as distribution network and its ability to raise resources at competitive rates. The Company has a strong business franchise of subsidiaries/ associates in Banking, Asset Management, Life Insurance, General Insurance, Educational loans and Real Estate funding. The liquidity profile also derives comfort from the ability of HDFC to raise funds through capital markets, deposits, banks and refinance facilities during the period of lockdown.
\HDFC’s outstanding loan portfolio (net of provisions and loans sold) stood at Rs. 5,68,363Crsas on March 31, 2022 and the outstanding individual loans stood at Rs. 28,455 Crsduring the year. During the financial year 2022, 78% of individual loans disbursedin value termswere from the salaried category, whereas the remaining 22%were from the self-employed category. This NBFC continues to maintain healthy capitalization levels supported by its strong capital raising ability with Capital Adequacy Ratio (CAR) of 22.8% with Tier-I CAR being 22.2%as on March 31, 2022. HDFC continues to have one of the most stable asset quality parameters in the housing finance industry with Gross NPA ratio of 1.91%, though there was some moderation in asset quality in FY21-22.Key risks include weakening of the credit profile of the group as a whole, material deterioration in asset quality, increase in debt-to-equity ratio beyond 7 times among the few.
Asian Paints Ltd.
Asian Paints enjoys a dominant share of over 50% in the organized domestic paints market. In the decorative paints segment, which comprises about 70-75% of the Indian paints industry; Asian Paints has a share of about 60%. It has also been able to garner a healthy position in the automotive industrial coatings segment with a market share of about 20%. Driven by its leadership position, the company has registered revenue at CAGR of 9% and profit CAGR of 13% over the five fiscals through 2021. Strong brand equity, extensive distribution network, and wide product portfolio has enabled it to maintain a strong market position. Due to the company’s leadership position, it enjoys a healthy operating margin of over16.51% which is higher than peers. Debt to equity has always been negligibleand currently stands at 0.11times.Asian Paints’ financial risk profile is strong, with adebt of Rs. 1587 crs. as of March 31, 2022.
The company’s profitability is currently under pressure on the back of unprecedented rise in its raw material prices. The crude oil prices have been highly volatile which may impact the margins in the near term. However, the company took some price hikes to offset this pressure. But, the volatility in raw materials continues to pose a risk, however, given the market share of Asian Paints, it the business will be able to bounce back.The long term structural story remains intact with drivers such as improved traction in business verticals, gains in market share and growth opportunities in rural and small towns.
Avenue Supermarts Ltd.
Avenue Supermarts Ltd. is a Mumbai-based company, which owns and operates D-Mart stores. D-Mart is a national supermarket chain that offers customers a range of home and personal products under one roof. As of March 31, 2022 the Company had 284 stores with a Retail Business Area of 11.5million sq. ft. across Maharashtra, Gujarat, Daman, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Chhattisgarh and Punjab. Strong procurement abilities, lower priced products along with healthy cost control measures all may result in higher growth in footfalls going ahead. This leads to high inventory turnover and revenue per sq. ft. and translates into industry leading retail store productivity.
The operating profitability of the company has seen improvement over the years with operating profit currently standing at 8.07%. The company has a decent debt on the books of Rs. 647 crores and with a cash of Rs. 299 crores. Avenue Supermarts is an apt benefactor of substantial improvement in geographical diversity and sales channel mix which would result in higher scale of operations with increased operating profitability over a period of time. Risks would include significant weakening of operating margin due to large gestation losses from new stores, larger than expected debt-funded capex increasing the now comfortable debt to equity ratio.
Kotak Mahindra Bank Ltd.
Uday Kotak led, Kotak Mahindra Bank is one of India’s leading financial services conglomerates, providing a wide span of various financial and banking solutions with a reach of 1476branches and 2705 ATMs across India. Kotak Mahindra Bank, too, emerged as a player who adopted a prudent and cautious approach, targeting only high-rated customers and sectors. This aided the bank’s low levels of bad loan formation over the years (Net NPA at 0.64%). Bank’s deposit franchise continues to be granular and robust with deposit accretion staying healthy with an industry leading CASA ratio of 60.7%. Kotak Bank has maintained its cautious stance towards unsecured retail, credit cards and small business lending. Bank’s 70% advances are given to corporate and business, home loans &LAP and agriculture segment, with corporate and business division having the highest exposure of nearly 58%. The business has a healthy asset under management of Rs. 3,82,504 crs for FY22.Digitalization is the backbone of the bank’s growth strategy and the company has been investing and enhancing its technology armor. The future growth is expected to be boosted by expanding distribution, deeper channel and robust digital infrastructure.The bank has proven its stable leadership, strong liability franchise, best-in-class margins and cautious underwriting measures.
Hampered economic scenario and uncertainty which lies ahead of investors, prevalent risk-aversion among market participants have all brought back the interest of many market participants to Blue Chip stocks. Given that these quality companies are more resilient to economic downturns, they may continue to grow or operate profitably even during adverse market conditions. Therefore, an investor’s portion should always be allocated to blue chips in order to cushion their portfolio during difficult times.
In order to get an exposure to Best Blue chip Stocks, you would need a total of Rs. 33145 for the below curated portfolio as on 15 September, 2022.
|Company Name||Weightage||CMP (Sept, 2022)||Quantity||Total (Rs.)|
|Reliance Industries Ltd.||13%||2,564||2||5,128.00|
|Tata Consultancy Services Ltd.||20%||3108||2||6,216.00|
|Hindustan Unilever Ltd.||7%||2564||1||2,564.00|
|Housing Development Finance Corporation Ltd.||16%||2460||2||4,920.00|
|Asian Paints Ltd.||16%||3397||2||6,794.00|
|Kotak Mahindra Bank Ltd.||18%||1,943||3||5,829.00|
|Avenue Supermarts Ltd.||9%||4521||1||4,521.00|
You could invest in the above model portfolio or if you’d like to invest in a ready-made basket of stocks without having to worry about researching the same, you could invest and create wealth with StockBasket.
How to evaluate and build the portfolio of the best blue-chip stocks?
Check out our video on how to evaluate and build a solid portfolio of the best blue chip stocks in India.
Detailed overview of the Best Blue Chip stocks to buy now in India
The table below covers some of the most important factors while evaluating Blue Chip stocks such as the return ratios – RoE, operating margins, sales and earning growth, market cap, etc.
Blue Chip Stocks (Excluding Banking Companies)
|Sr. No.||Company Name||BSE Scrip Code||NSE Symbol||CMP (Sept 2022)||Rating||Industry||Market Cap (in Crs)||Compounded Sales Growth (5 years)||Compounded Profit Growth (5 years)||Operating Profit Margin (%) Q3 FY22||Price to Earnings (times)||Price to Book (times)||EV/EBITDA||Debt to equity (times)||Dividend Yield (%) Q3 FY22||Return on Equity (%) Q3FY22||Return on Capital Employed (%) Q3FY22|
|1||Reliance Industries Ltd.||500325||RELIANCE||2,564||2.0||Crude Oil||1,836,208.4||18.16||14.41||15.78||31.30||2.36||16.56||0.36||0.26||8.15||9.63|
|2||Tata Consultancy Services Ltd.||532540||TCS||3108||5.0||Information Technology||1,229,404.7||10.2||7.83||27.67||32.09||13.79||21.37||0.09||1.28||43.64||54.87|
|3||Hindustan Unilever Ltd.||500696||HINDUNILVR||2564||5.0||FMCG||516,886.6||9.6||15.65||24.51||58.00||10.54||39.18||0.02||1.55||18.43||24.35|
|4||Infosys Ltd.||500209||INFY||1433||4.5||Information Technology||621,355.4||12.18||9.16||25.89||28.27||8.25||18.13||0.07||2.1||28.98||37.09|
|5||Housing Development Finance Corporation Ltd.||500010||HDFC||2460||3.0||Finance – Housing||395,466.3||17.37||15.38||34.5||17.50||2.20||16.11||2.83||1.38||13.45||8.6|
|6||Bharti Airtel Ltd.||532454||BHARTIARTL||785||0.5||Telecom||381,644.9||4.07||-3.38||49.37||103.82||5.95||8.89||2.55||0||5.86||11.97|
|8||Asian Paints Ltd.||500820||ASIANPAINT||3397||3.0||Chemical – Paints||259,822.7||14.08||9.71||16.51||84.32||18.81||50.39||0.11||0.71||23.15||29.73|
|9||Nestle India Ltd.||500790||NESTLEIND||16775||5.0||FMCG||161,736.4||9.98||18.14||23.78||69.79||77.59||43.61||0.13||1.19||113.08||147.06|
|10||HCL Technologies Ltd.||532281||HCLTECH||922||4.5||Information Technology||275,532.0||12.48||9.51||23.97||20.41||4.45||12.47||0.1||3.15||22.16||25.65|
|11||Maruti Suzuki India Ltd.||532500||MARUTI||9198||2.0||Automobiles & Ancillaries||239,703.5||5.34||-8.09||6.46||61.79||4.33||31.14||0.01||0.57||7.2||8.87|
|12||Larsen & Toubro Ltd.||500510||LT||1964||0.5||Infrastructure||222,729.6||7.44||7.74||15.44||25.86||2.70||12.46||1.52||1.14||10.81||11.23|
|13||Titan Company Ltd.||500114||TITAN||2652||0.5||Diamond & Jewellery||190,186.0||16.78||23.37||11.6||85.98||20.44||54.79||0.78||0.35||26.33||21.38|
|14||Britannia Industries Ltd.||500825||BRITANNIA||3728||4.5||FMCG||80,952.2||9.32||11.38||15.57||53.40||31.65||34.35||0.97||1.68||49.66||41.51|
|15||Bajaj Auto Ltd.||532977||BAJAJ-AUTO||3790||5.0||Automobiles & Ancillaries||112,303.3||8.79||6.25||15.84||20.32||3.76||15.67||0||3.61||19.35||23.86|
|16||Eicher Motors Ltd.||505200||EICHERMOT||3633||4.5||Automobiles & Ancillaries||74,177.2||7.92||0.11||21.09||44.24||5.88||26.77||0.01||0.63||13.94||18.23|
|17||Dr. Reddys Laboratories Ltd.||500124||DRREDDY||4164||1.0||Pharmaceuticals & Drugs||72,421.1||8.7||11.75||17.49||33.18||3.77||16.98||0.18||0.57||11.78||14.53|
|18||Avenue Supermarts Ltd.||540376||DMART||4521||4.0||Retailing||243,281.5||21.09||25.77||8.07||163.01||17.79||93.13||0.05||0||11.54||15.75|
|19||Pidilite Industries Ltd.||500331||PIDILITIND||2895||4.0||Chemical||107,187.9||12.05||6.97||18.62||88.82||16.74||56.58||0.06||0.4||20.12||25.99|
Blue Chip Banking Companies
|Sr. No.||NSE Symbol||BSE Scrip Code||NSE Symbol||CMP (Sept 2022)||Rating||Industry||Market Cap||Price to Book (times)||Return on Equity (%)||Return on Assets (%)||Net Interest Margin (%)||GNPA%||NNPA%||CASA Ratio (%)||5-year NII CAGR||5-year PAT CAGR||CRAR||Deposits Growth YoY (%)||Advances Growth YoY (%)||Provision Coverage Ratio (%)||
Cost to income ratio (%)
|1||HDFC Bank Ltd.||500180||HDFCBANK||1529||5.0||Bank – Private||7,50,131.0||3.58||18.10%||1.93%||4.20%||1.17%||0.32%||48.00%||17%||20%||18.90%||16.80%||20.70%||73.00%||36.90%|
|2||Kotak Mahindra Bank Ltd.||500247||KOTAKBANK||1943||4.5||Bank – Private||3,55,699.0||4.19||14.20%||2.52%||4.78%||2.34%||0.64%||60.70%||7%||20%||22.70%||11.27%||21.00%||73.20%||52.60%|
|3||ICICI Bank Ltd.||532174||ICICIBANK||921||4.0||Bank – Private||5,00,715.0||3.15||15.90%||1.69%||4.00%||3.60%||76.00%||42.50%||16%||20%||18.87%||18.43%||17.50%||79.20%||41.30%|
|4||Axis Bank Ltd.||532215||AXISBANK||796||1.0||Bank – Private||2,02,921.0||1.96||13.60%||1.41%||3.49%||2.82%||0.73%||43.00%||13%||29%||18.54%||19.00%||15.00%||75.00%||50.50%|
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