Which are some of the best blue chip Indian stocks for long term investment?
Do remember that just because the market capitalization is high now, doesn’t mean that the company will not fail or will not have a down turn. Reliance Industries is a very good example of it. It was the Bluest of Blue Chip companies in 2008–09 and it went into a bear phase for such a long time, that it took almost 8 years to regain its stock price and market capitalization.
In Apr 2006, when the Sensex hit 12,000 mark, the 30 Sensex stocks were: ACC, Bajaj Auto, Bharti Tele, BHEL, Cipla, Dr Reddy's, Gujarat Ambuja, Grasim, HDFC, HDFC Bank, Hero Honda, Hindalco, HLL, ICICI Bank, Infosys, ITC, L&T, Maruti, NTPC, ONGC, Ranbaxy, Reliance, Reliance Energy, Satyam, SBI, Tata Motors, Tata Power, TCS, Tata Motors and Wipro.
In 2017, when the Sensex hit 30,000 mark, the 30 Sensex stocks were: TCS, Reliance Industries, HDFC Bank, Infosys, ONGC, Coal India, SBI, ITC, HUL, Tata Motors, Maruti Suzuki, Sun Pharma, ICICI Bank, L&T, Bharti Airtel, Axis Bank, NTPC, Wipro, M &M, Bajaj Auto, Hero Moto, GAIL, Dr. Reddy’s, Cipla, Tata Steel, Adani Ports, Asian Paints, BHEL, HDFC.
On comparison, we see that ACC, Gujarat Ambuja, Grasim, Hindalco, Ranbaxy, Reliance Energy, Satyam, Tata Power are out, which means almost 30% change in the Sensex companies alone.
Now the second point of note is that in the list of the companies which are out, some of them are performing very well, while some have become ordinary companies with high debt and Satyam doesn’t even exist.
Hence, never judge a company by market capitalization or how famous it is. Think of all the midcaps which are making money since the last 5 years  . The important aspects are to
- identify if the sector of the company is for long term and is it part of the economy
- the growth prospects of the company and sector
- the investments and financial ratios
- the management and the corporate governance of the company
Do remember, bad things happen for a reason. Take the case of Infosys. This stock was the bellwether and no one thought it would ever have issues. What has happened to this company?
- Fallen market capitalization, low stock price
- Dwindling growth prospects and operating margins at risk
- H1B visa issues, unpreparedness in adapting to new technologies
- Promoters raising issues of corporate governance
- Senior management pay issues
- Rumors of promoters selling stake.
Hence, there is no hard and fast rule for a company to be called Blue Chip. Just make hay while the sun shines. Invest, make money and let go of the company when there is no more value.
Don’t be sentimental about the company or investment. Just worry about the returns