Blue-Chip Stocks [India]: List of Mature and Stable Companies [2022]

Blue Chip Stocks India - Featured Image
"If one desires to start investing in the stock market, the best starting point will be large-cap stocks. Even better will be to buy prime stocks within the large-cap space. Which are these prime stocks? They are blue-chip stocks."

Here is a list of top Blue-Chip companies of the Indian stock market

(Updated: 15-May-2022)

SLNameSectorM.Cap (Rs.Cr.)Income (Rs.Cr.)PAT (Rs.Cr.)GMR Score
1HDFCAMCFinancial38,707.922,115.361,393.1378.81
2PGHHConsumer Staples43,898.283,911.13582.1876.77
3CASTROLINDChemicals10,123.674,289.10742.972.85
4COALINDIAMaterials1,06,368.691,03,706.8715,264.5771.21
5INFYTechnology6,43,118.251,21,641.0022,146.0063.14
6SUNTVServices16,624.463,530.521,717.1062.29
7POWERGRIDEnergy1,65,876.2741,440.5716,406.6161.69
8HDFCBANKFinancial7,25,939.501,35,936.4138,150.9060.82
9PFCFinancial28,209.2775,557.3618,391.3059.71
10VSTINDConsumer Staples4,874.941,560.67320.2358.99

When I started investing in stocks, I heard oldies of the market talk about blue-chip companies. The stock market is a wide topic, hence the views of even experts vary about it. But they all seem to agree on one thing, blue-chip stocks are reliable. In this article, we’ll dig deeper into the concept of blue-chip companies. But first, check this mini-list of Indian blue-chip stocks.

7 Facts About Blue Chip Companies

What are blue-chip companies?

Blue-chip companies are established mature and profitable businesses. These companies are mostly the leader of their sector or industry. A recognizable brand name further gives these companies an edge over their competitors. 

Why are they called blue-chips? Probably the term “blue-chip” is taken from the game of poker, a card game. In this game, colored chips are used. Blue-chips are the most pricy of all the colors. Taking this analogy forward, companies of the stock market that carry a high value are tagged as blue-chips.

Another characteristic of a blue-chip business is that they are very well-capitalized. What does it mean? It means that a lot of money is invested in it. This invested money can be both reinvested profits and investors’ money. The investors can be HNIs, FIIs, DIIs, and common shareholders.

As these companies are well established and mature, their size is large. Hence, all blue-chip companies will eventually fall into the large-cap space. 

Combining the two characteristics, large size, and well-capitalized makes such companies safer for investing.

The easiest way to identify blue-chip companies is to look into the constituents of Sensex or Nifty-50. We can also refer to a list of the highest market capitalization stocks and treat them as blue chips.

We’ve built a stock screener which identifies industry leaders as blue-chips. We’ve also used filters like growth and profitability to further refine the stock list. Check our blue-chip screener here.

Warning About Blue Chip Stocks

There are two main limitations of blue-chip stocks.

  • Growth: Their future growth prospects may not be as fast as other smaller businesses. Why? Because these companies have already become so big, within their own sectors, their future growth possibility becomes comparatively smaller. 
  • Valuation: Blue-chip stocks attract attention. Hence, they often trade in the overbought space. It is very difficult to find a blue-chip stock trading at undervalued price levels. 

If one wants to invest in a blue-chip stock, attention must be given to future growth prospects and price valuation. 

I personally do not worry about growth factors a lot. Blue-chip companies enjoy a competitive moat. So a slow but reasonable future growth is something which they can deliver. But their price valuation is a concern. 

No matter how good the company is, buying its stocks at overvalued price levels will not help. In dealing with blue-chip stocks, emphasis must be on the price at which it is bought. How to do it? We can try to estimate its intrinsic value.

How is the Present Market Situation?

Sensex 30 Companies - Price Chart 1986 onwards

What is the present situation? As of today (4th Mar’22), Sensex has corrected by about 4,800 points (8% down) this year. Nifty-50 is at 16,200 levels. In my earlier blog of Oct’21, we discussed Nifty cooling down to 16,000 levels. Such a correction looked unlikely back then. But it looks possible now. 

When a bellwether index like Sensex and Nifty corrects by 7-8%, it takes even big stocks down. Let me give you a snapshot of the present scenario. This is a list of the top 20 stocks by market cap. Check their last one and two-month price corrections.

Blue-Chip Stocks - Top 20 - Price correction

Though the main indices have fallen by 7-8% odd percentage points, few top stocks have corrected by 15% or more. So, in the present situation, the market is falling. But stocks of a few blue-chip companies have corrected much more. 

So, shall we go ahead and start buying these stocks? This decision can be taken only after value analysis. Please read further. 

They are Expensive Stocks

Blue-chip stocks are the most expensive stocks in the market. How can we say that? By looking at their P/E multiples. Allow me to present to you a list of Top 20 stocks with their PE, after price correction in the last months:

Blue-Chip Stocks - Top 20 - PE multiples

Except for Banks, NBFCs, and energy companies, PE’s other stocks are high. Read: About low P/E stocks.

This is the risk of investing in a blue-chip company. If we buy such stocks casually, there are high chances that we are buying them at overvalued levels. Though the business fundamentals of these companies are strong, the expensive purchase will only yield below-par returns. 

Pros and Cons of Blue Chip Stocks

Blue Chip Stocks India - Pros and Cons

One thing is for sure, most of the time, blue-chip stocks trade at a high P/E multiple. So, if these stocks are so expensive, is it worth buying them? Yes and No.

  • Yes: because they represent high-quality companies. Target of any stock investor is to buy stocks of quality companies. They happen to be those easy-to-find quality companies. But as all are aware of their quality attribute, everyone wants to buy them. They are always in demand, hence they trade at high P/E multiples.
  • No: Because they may yield minimal returns if bought at high PE levels.

Am I confusing you about blue-chip stocks? Sorry, it was necessary to highlight the negative aspect of it. Let’s dig deeper into the advantages and disadvantages of these stocks:

Advantages

The returns generated by blue-chip stocks in the long term are more assured. How are they more assured? In three ways: (a) they can yield consistent dividends, (b) their earning growth is more certain, and (c) their stock price is more stable.

  • Consistent dividends: These are stocks that have a high market share and are also reasonably profitable. In other words, they enjoy economic moat. Their earning power allows them to distribute dividends. They are often the best dividend payers in the market.
  • Predictable growth: Strong business fundamentals of these stocks make their future growth almost certain. How? Large size, high market share, and moat make them invincible. How does it help? They have pricing power – leading to future growth. Read more about pricing power and why Buffett loves it.
  • Price stability: prices of these stocks are stable. It does not mean that their price does not fall when the index is falling. Their price will also fall, but it will be slower and recovery will be faster. Read more about why stock prices fluctuate so much.

There is no doubt that blue-chip stocks are the safest investment bets for long-term investors. But blue-chip stocks must also be dealt with care.

Disadvantages

Once a blue-chip, always a blue-chip? This is a wrong assumption. No company can continue to enjoy its prime position forever. Some known examples are Reliance Communication, DLF, Kodak, Nokia, Lehman Brothers, etc.

These companies once enjoyed almost monopoly business in their industry. What are the lessons we can learn from these examples? Fundamentals of blue-chip stocks cannot be taken for granted. Let’s look at its few immediate disadvantages:

  • They are Not Risk-Free: People often refer to blue-chip stocks as risk-free. Why? Because they represent companies that are fundamentally strong. But what about those moments of time when the whole stock market is falling (like in 2008-09)? The price of even the best of stocks will fall.
  • Slower Growth: In most cases it is true. As blue-chip companies are all matured, large companies, hence their future growth is not as fast. If we will compare the potential returns of growth stocks versus blue-chips, the latter cannot win. If the objective is faster capital appreciation in long term, blue-chips will not deliver.

Plan To Invest In Blue Chip Stocks

Till now what we have seen are a few good and bad points about blue-chip stocks. At this stage, we are prepared to deal with it. So in this portion, we will see three ways one can plan investing in blue-chip stocks. 

  • Screener: We’ve built a blue-chip stock screener. This tool is designed to highlight the leaders of each sector or industry. Subscribed users will also see an “Overall Score” and “Intrinsic Value” of a few selected stocks. These two numbers highlight the quality and valuation of its company. To know more about the screener, please check it here.
  • Index Funds: I’ve written an article about index investing. It talks about how people can use indices to invest in the market. If I’ll go the index route for investing in blue-chips, I’ll focus on two indices, Nifty-50, Nifty Next 50.
  • Index ETFs: Index ETFs and index funds are two similar financial instruments. ETFs is a hybrid product of mutual funds and stocks. In case you want to know their difference in detail, please visit the link. There are few ETFs listed on NSE. ETFs underlying index is Nifty 50, Nifty Next 50, and Nifty50 Value 20 are suitable for indirect investing in bluechip stocks. 

Quality of Blue Chip Stocks

On the internet, there are several definitions of blue-chip stocks. Frankly speaking, when I read all of them, it confuses me more.  Hence, I follow a three-step rule to identify a blue-chip company.

  • Sector Leaders: Companies that are leaders of their industry can be tagged as a blue-chip. We can select a sector leader using four metrics, current market cap, revenue, net profit, or net worth. Our blue-chip screener’s algorithm is designed to consider all four on a weighted average basis. 
  • Profitable Business: A market leader which is also profitable gives us an ideal blue-chip contended. Our blue-chip screener considers current ROE, ROCE, Operating Margin, and PAT margin, together, to quantify the profitability level of a company. 
  • Dividend Distribution: The screener also factors in how much dividend the company’s stock is yielding currently. A higher dividend will improve the score. 

Based on the current metrics of stocks, the screener filters blue-chip companies from others. Based on this data it also yields a GMR score for each stock (on a scale of 1 to 100). Further, we also analyze selected stocks based on their 10-Year financial and price data. The 10-Year analysis will further yield two numbers, Overall Score (on a scale of 1 to 100) and the stock’s intrinsic value.

Conclusion

Large Cap Vs Blue Chip Stocks

There is no doubt that Blue Chip stocks are stocks of the highest quality available in the market. What gives them this high stature is their proven past record.

Their business is so sound that they’ve become the leaders of their industry. Moreover, they also enjoy a competitive advantage over their business rivals.

If one desires to start investing in the stock market, the best starting point will be large-cap stocks. Even better will be to buy prime stocks within the large-cap space.

Which are these prime stocks? They are blue-chip stocks. But as explained in this article, there are a few limitations with these stocks. Care must be taken before investing in these stocks. 

An informed investment in blue-chip companies can result in above-average returns in the long term. 

Thanks for reading it through the end. Have a happy investing. 

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18 Responses

  1. Hello, First of all, Thank you so much for sharing this amazing information and it’s very impressive and so much helpful for me. Keep it up and once again Thanks.:)

  2. In your ‘best dividend giving stocks’ blog you have mentioned many stocks which have negligible dividend yield, both 5-year average and current…why have you put them in the list??

    1. Idea is to highlight those companies which have the capabilities to pay consistent-dividends. Hence, mostly blue chip, large companies are picked for evaluation. Only dividend yield may not be the right way to look as “dividend-paying stocks”.

  3. Thanks for such wonderful knowledge sharing and educating people through this medium.
    Excellently explain in detail.very good.all the best.

  4. Hi Mr.Mani,
    I dont find the Screener option in MoneyControl as detailed by you in one of your article. Is it removed from Moneycontrol or moved to a different place.
    Can you suggest me a good screener where I can filter stocks with my preference criteria?

  5. “How to identify them? By looking at their market capitalisation.”- is it Market cap or Enterprise value?

  6. Thank you for valuable guidelines. Pictorial representation along with the summary helps to understands concept thoroughly. Appreciate your efforts in improving all interested folks.

  7. Thanks for sharing the informative post. Following these blogs helps in knowing the secret of success, Business insights, and updates respectively. In this trending era, where people are looking for the experts guidance for the things which they don’t know, I learn a lot of things from this post. For the upcoming posts please let me know.

  8. Hello, Must say wealth of information. Really helped me to uncover lots of my doubts and questions. Please advise if you also do consulting for trading/on-line investments. Thanks

  9. Is Vakrangee is still fundamental stock for long term investment? can we still continue investing in Vakrangee?

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