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Blue Chip Stocks In India-the Top List
Total Articles: 6
Isn’t it interesting that the name given to the safest type of stocks-Blue Chips, comes straight from the poker table. Blue chip is the highest denominated chip in a poker game. No wonder then that many people treat investing in the stock markets as not very different from gaming.
In stock investing, having a few blue chip stocks in your portfolio strengthens your position (and gives you confidence!).
It is important to understand what exactly qualifies a stock as Blue chip? When is the right time to buy it?
What qualifies as a Blue Chip Stock in India?
There is no boilerplate definition, nor an official list for blue chip stocks in India. Yet you can find many lists and as many explanations and definitions for what constitutes a blue chip. Certain common characteristics exist in all these explanations. Blue chips are stocks of:
-Large well established companies that have demonstrated the ability to withstand economic slowdowns (i.e. their earnings grow or at best remains stable in all economic environments);
-Companies which operate in well established industries (i.e. there is obvious demand for their products or services in the foreseeable future);
-Companies which enjoy competitive advantages (i.e. economic moats) over its peers;
-Enjoy good credit ratings from rating agencies and financial institutions in debt markets.
Right time to buy
While many market participants try to buy shares when they decline by 20-30-or 40 percent from their historic highs, a better approach is to slowly add select high quality blue chip stocks to your portfolio every time you find them trading at a discount of 10-15% from their historic PE ratios. Many websites and research tools give you historic PE values and historic growth figures.
For a disciplined long term investor, following this simple approach, it is not difficult to make a stable portfolio of stocks which will continue to grow and provide stable dividend income for many years to come.
The important point is to stay disciplined and not get tempted to trade stocks on a daily basis. It does not take a great deal of scrutiny of the stock markets to discover that over a period of time, stocks outperform any other asset class. It is the stock market crashes and the periods of sluggish growth which are frustrating for investors, particularly those who have the bad habit of looking at their portfolio on a daily basis.
That said, for the more disciplined investor, buying some quality blue chip stocks in India when they fall substantially below their historic PE ratios is a sure (and the safest) way of growing their money over a period of time.
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