Top 10 stocks in India For Long Term

Investing in the best stocks for long-term growth can secure your financial future. This article explores the top stocks in India for long-term investment, focusing on companies with stable revenue, strong profits, and solid fundamentals. Learn how to build a diversified portfolio, including stocks like Reliance and TCS, and understand the promising future of India’s economy. Top 10 Stocks List.

1. Introduction

Investing in long-term stocks can be a game-changer for securing financial stability and growth. In India, a burgeoning economy with vast opportunities, choosing the right stocks can lead to substantial returns. This article aims to guide you in selecting the top stocks for long-term investment.

Understanding the fundamentals of long-term stocks is crucial for building a robust portfolio. This involves analyzing a company’s revenue, profit margins, and market position. By focusing on these aspects, investors can identify stocks with strong growth potential and stability, providing a solid foundation for long-term wealth accumulation.

In this article, we will explore the parameters essential for filtering long-term stocks and the factors to consider when building a diversified portfolio. Additionally, we will highlight the top stocks in India, backed by strong fundamentals, and discuss the promising future of India’s economy, based on recent insights from the Reserve Bank of India.

2. What are long-term stocks?

Long-term stocks refer to shares in companies that investors buy with the intention of holding for an extended period, typically three years or more. These stocks are generally from companies with strong fundamentals, consistent revenue growth, and stable profits. Good long-term stocks often belong to industries with sustainable demand, have a competitive edge, and show resilience in various market conditions. They are selected based on their potential to provide steady returns and capital appreciation over time.

3. What parameters to consider to filter stocks for long-term holding

As a seasoned investor, identifying the right stocks for long-term holding is crucial for building a robust portfolio. Key parameters such as stable revenue, consistent profits, high profit margins, fast revenue growth, and high free cash flow are essential. These indicators reflect a company’s financial health and growth potential, ensuring sustainable returns and capital appreciation over time.

3.1 Stable Revenue

Stable revenue is a hallmark of a strong company. It indicates consistent demand for its products or services, reflecting reliability and resilience in various market conditions. For long-term investors, companies with predictable and stable revenue streams are preferable as they provide a solid foundation for future growth and profitability.

3.2 Stable Profits

Consistent and stable profits demonstrate a company’s efficient operations and sound management. It indicates that the company can manage its costs effectively and maintain profitability regardless of market fluctuations. As a long-term investor, selecting companies with stable profits ensures steady returns and minimizes the risks associated with earnings volatility.

3.3 High Profit Margin

High profit margins indicate a company’s ability to control costs and price its products or services efficiently. Companies with higher profit margins typically have a competitive advantage, as they can reinvest more in growth and innovation. For long-term investors, focusing on high-margin companies can lead to better capital appreciation and resilience during economic downturns.

3.4 Fast Revenue Growth

Rapid revenue growth is a strong indicator of a company’s expanding market share and increasing demand for its products or services. It signals robust business prospects and potential for higher future earnings. For long-term investors, companies with fast revenue growth offer significant upside potential, making them attractive additions to a growth-oriented portfolio.

3.5 High Free Cash Flow (FCF)

High free cash flow indicates a company’s ability to generate surplus cash after covering operating expenses and capital expenditures. This surplus can be used for dividends, buybacks, and reinvestment in the business. For long-term investors, companies with high free cash flow provide financial flexibility and security, ensuring sustained growth and shareholder value. Read more about free cash flow.

4. What factors to consider to build a stock portfolio for long term

Building a long-term stock portfolio requires careful consideration of various factors to ensure sustainable growth and risk management. A well-constructed portfolio should include fundamentally strong and undervalued stocks from diverse sectors, with a balanced allocation across different market capitalizations. Holding investments for a significant period and adjusting the portfolio based on fundamental strengths and valuations are essential strategies for long-term success.

4.1 Include Only Fundamentally Strong Stocks

Fundamentally strong stocks are the cornerstone of any successful long-term portfolio. These stocks belong to companies with solid financial health, characterized by stable revenue, consistent profits, high profit margins, and robust cash flows. Additionally, fundamentally strong companies typically have a competitive advantage in their industry, such as strong brand recognition, proprietary technology, or a unique business model. They exhibit sound management practices and have a clear strategic vision for future growth. By focusing on fundamentally strong stocks, investors can reduce risks associated with market volatility and economic downturns, ensuring that their investments are more likely to withstand adverse conditions and generate sustainable returns over time.

4.2 Pick Only Undervalued Stocks

Undervalued stocks offer significant potential for growth, as they are priced below their intrinsic value. Identifying these stocks requires a thorough analysis of financial statements, market trends, and industry conditions. Key indicators of undervaluation include a low price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and a high dividend yield compared to industry peers. By investing in undervalued stocks, investors can capitalize on the market’s mispricing and benefit from the stock’s appreciation as it moves closer to its intrinsic value. This approach not only maximizes returns but also provides a margin of safety, reducing the downside risk. Learn about intrinsic value of stocks.

4.3 Include Different Types of Stocks of Multiple Sectors/Industries

Diversification is essential for managing risk in a long-term portfolio. Including a mix of stocks from various sectors and industries helps mitigate the impact of sector-specific downturns and economic cycles. For instance, combining technology stocks with consumer goods, healthcare, financials, and industrials can create a balanced portfolio that performs well in different market conditions. Each sector responds differently to economic changes, interest rates, and geopolitical events, so diversification ensures that the overall portfolio remains stable and continues to grow. By spreading investments across multiple sectors, investors can achieve a more resilient portfolio that is less susceptible to significant losses.

4.4 Distribute Funds Between Large, Mid, Small-Cap, and Penny Stocks

A well-balanced allocation across market capitalizations is crucial for optimizing returns and managing risk. Large-cap stocks, which constitute 45% of the portfolio, offer stability and consistent returns, given their established market presence and strong financials. Mid-cap stocks, comprising 30%, provide a balance of growth and stability, as they have significant growth potential while being less volatile than small-cap stocks. Small-cap stocks, making up 20%, offer high growth potential but come with higher risk due to their volatility and market sensitivity. Lastly, allocating 5% to penny stocks can add an element of speculative growth, though these should be carefully chosen and monitored due to their high-risk nature. This strategic distribution ensures a balanced approach to growth and risk management.

4.5 Buy Stock with the Intention of Holding For Long Term

Long-term investing requires patience and a commitment to holding stocks for an extended period, typically three years or more. This approach allows investors to ride out market fluctuations and benefit from the compound growth of their investments. Holding stocks for the long term reduces transaction costs and capital gains taxes, enhancing overall returns. Moreover, it provides companies with the time needed to execute their growth strategies and realize their full potential. By focusing on the long-term horizon, investors can avoid the pitfalls of short-term market timing and speculation, ensuring a more stable and profitable investment journey.

4.6 Sell Holdings Only of Fundamentally Weak Stocks or Overvalued Stocks

Regular portfolio review is crucial to maintaining a healthy long-term investment strategy. Investors should sell holdings of stocks that show signs of fundamental weakness, such as declining revenues, shrinking profit margins, or poor management practices. Similarly, stocks that become significantly overvalued compared to their intrinsic value should be sold to lock in gains and avoid potential corrections. This disciplined approach to selling ensures that the portfolio remains strong and focused on high-quality investments. By continuously monitoring and adjusting the portfolio based on fundamental strengths and valuations, investors can optimize returns and mitigate risks over the long term.

5. About Top 10 Stocks in India for Long Term

(Updated: 12-July-2024)

CompanySectorIndustryPriceRevenue (TTM)(Cr)Net Profit (TTM)(Cr)
NESTLEIND:[500790]Consumer StaplesDairy products2592.324541.853932.84
BRITANNIA:[500825]Consumer StaplesBakery & Milling Prod.5793.4516983.452137.41
M&M:[500520]AutomobileCars & Multi Utility Vehicles2704.15141254.6911148.39
JIOFIN:[543940]FinancialMisc. Fin.services350.351854.681176.03
AMBUJACEM:[500425]MaterialsCement676.334326.044715.11
POLYCAB:[542652]Capital GoodsWires & cables6562.4518260.321802.92
AMARAJABAT:[500008]Capital GoodsStorage Batteries1615.7510475.24694.41
FINPIPE:[500940]MaterialsPlastic Tubes & Pipes3154518.43236.59
BECTORFOOD:[543253]Consumer StaplesBakery & Milling Prod.14201374.1690.41
ADORWELD:[517041]Capital GoodsWelding machinery1450896.963.19
  • Nestle India: It operates in the food and beverages sector, offering products like Maggi, KitKat, and Nescafé. Recently, it reported revenues of ₹24,275 crore, with a net profit of ₹3,932 crore and a profit margin of 16%. Nestle’s strong brand portfolio, consistent revenue growth, and high-profit margins make it a fundamentally strong and relatively well-valued stock for long-term investment.
  • Britannia Industries: It is a leading player in the Indian food industry, known for its biscuits, dairy products, and snacks. The company posted revenues of ₹16,546 crore, profits of ₹2,139 crore, and a profit margin of 12.74%. Britannia’s robust distribution network, consistent profit growth, and solid financial health make it an attractive stock for long-term investors.
  • Mahindra & Mahindra operates in the automotive sector, producing vehicles, tractors, and financial services. Recently, it reported revenues of ₹139,078 crore, with a net profit of ₹11,268 crore and a profit margin of 8.1%. With its diverse product range and leadership in the tractor segment, Mahindra & Mahindra offers strong business fundamentals and attractive long-term growth potential.
  • Jio Finance, part of Reliance Industries, focuses on digital financial services, including payments, lending, and insurance. It has shown robust revenue growth, with a recent profit margin of around 7%. Jio Finance’s integration with Jio’s extensive telecom network provides a competitive edge, positioning it as a promising long-term investment in the financial sector. Recently it reported revenue of ₹1,853 crore, and net profit of ₹1,604 crore. It operates with a net margin of 63%.
  • Ambuja Cements is a major player in the Indian cement industry. It recently reported revenues of ₹33,159 crore, profits of ₹3,576 crore, and a profit margin of 14%. Known for its operational efficiency and sustainable practices, Ambuja Cements has strong business fundamentals and is well-positioned for long-term growth in the infrastructure sector.
  • Polycab is a leading manufacturer of wires and cables in India. The company posted revenues of ₹18,039 crore, with a net profit of ₹1,784 crore and a profit margin of 10%. Polycab’s robust market position, strong financial performance, and ongoing expansion into new product categories make it an attractive stock for long-term investors.
  • Amara Raja is a prominent player in the battery manufacturing sector, catering to automotive and industrial segments. Recently, it reported revenues of ₹11,708 crore, profits of ₹934 crore, and a profit margin of 7.98%. With its strong market presence and focus on innovation, Amara Raja is well-positioned for sustained growth and long-term investment.
  • Finolex Industries operates in the PVC pipes and fittings industry. The company posted revenues of ₹4,317 crore, with a net profit of ₹473 crore and a profit margin of 10%. Known for its quality products and extensive distribution network, Finolex Industries exhibits strong business fundamentals, making it a solid long-term investment.
  • Mrs Bector Food specializes in bakery and dairy products. It recently reported revenues of ₹1,623 crore, with a net profit of ₹140 crore and a profit margin of 8.6%. With a strong brand presence and consistent growth in the food sector, Mrs Bector Food presents a compelling long-term investment opportunity.
  • Ador Welding is a leading manufacturer of welding products and services in India. The company posted revenues of ₹657 crore, with a net profit of ₹58 crore and a profit margin of 6.82%. Ador Welding’s solid market position, innovative product offerings, and steady financial performance make it a promising long-term stock.

6. Long-term fundamentals of India as an economy

India’s long-term economic fundamentals remain robust, driven by demographic advantages, structural reforms, and a resilient macroeconomic framework. According to the recent RBI press release, India’s economy is poised for sustained growth, backed by strong domestic demand, progressive policy measures, and a focus on infrastructure development.

The demographic dividend, characterized by a young and dynamic workforce, positions India favorably for long-term growth. As the working-age population expands, the potential for increased productivity and consumption rises, fueling economic expansion. The report highlights that ongoing structural reforms, such as the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC), have improved the business environment, enhancing efficiency and fostering a culture of entrepreneurship.

The RBI emphasizes that India’s macroeconomic stability is underpinned by prudent fiscal and monetary policies. Inflation has been contained within manageable levels, and the country’s foreign exchange reserves are robust, providing a buffer against global economic uncertainties. Furthermore, the RBI’s accommodative monetary stance supports growth while ensuring financial stability. The report states, “India’s GDP growth is expected to remain strong (8.2%), driven by domestic consumption and investment.”

Infrastructure development remains a cornerstone of India’s economic strategy. Significant investments in roads, railways, and urban infrastructure are expected to boost connectivity, reduce logistical costs, and spur industrial growth. The government’s emphasis on the ‘Make in India’ initiative and digitalization further accelerates economic modernization and integration into global value chains.

The future prospects for India’s economy are promising, with the RBI projecting a steady growth trajectory. The focus on renewable energy, technology adoption, and skill development aligns with global trends and positions India as a competitive player on the world stage. The RBI report concludes, “India is well-positioned to achieve sustainable and inclusive growth over the long term.” Overall, India’s economic fundamentals and strategic initiatives lay a strong foundation for sustained long-term growth and development. Source: RBI’s press release in June 2024.

Key Data Points From the RBI’s Report

CategoryMetricValue
Policy RatesRepo Rate6.50%
Standing Deposit Facility (SDF) Rate6.25%
Marginal Standing Facility (MSF) Rate and Bank Rate6.75%
GDP GrowthReal GDP Growth for 2023-248.20%
Projected Real GDP Growth for 2024-257.20%
– Q17.30%
– Q27.20%
– Q37.30%
– Q47.20%
InflationCPI Inflation Projection for 2024-254.50%
– Q14.90%
– Q23.80%
– Q34.60%
– Q44.50%
Foreign Exchange ReservesHistorical High (as on May 31, 2024)US$ 651.5 billion
Financial TransfersSurplus Transferred to Central Government for 2023-24₹2.11 lakh crore
Contingent Reserve Buffer (CRB)Increased to 6.5% from 6.0%
Monetary TransmissionWeighted Average Call Rate (WACR)Close to the middle of the corridor
Gross Non-Performing Assets (GNPAs) of SCBs and NBFCsBelow 3% of total advances
External SectorNet Foreign Portfolio Investment (FPI) Inflows in 2023-24US$ 41.6 billion
Net FPI Outflows in 2024-25 (up to June 5)US$ 5.0 billion
India’s Share in World Remittances in 2024Expected 15.2%

Conclusion

Investing in the best stocks for long-term growth is a strategic approach to securing financial stability and wealth accumulation. By focusing on fundamentally strong, undervalued stocks across diverse sectors, investors can build a resilient portfolio that performs well over time. Companies like Nestle India, Mahindra & Mahindra, and Jio Finance, among others, offer robust growth potential and financial health, making them top picks for long-term investment.

India’s strong economic fundamentals, supported by a young workforce, structural reforms, and prudent fiscal policies, further enhance the prospects of these investments. With a commitment to holding quality stocks for at least three years and regularly reviewing portfolio performance, investors can maximize returns and minimize risks.

As India continues to develop and modernize, the opportunities for growth and capital appreciation remain abundant, making long-term investment in top stocks a prudent and rewarding strategy.

Frequently Asked Questions

1. Which shares to buy for long term?

Shares for the long term include fundamentally strong companies like Nestle India, Mahindra & Mahindra, and Jio Finance. They offer consistent growth, stable profits, and strong market positions.

2. Name a few stock that never go down in India?

No stock is guaranteed to never go down. Even in India, strong companies like Reliance Industries, TCS, HDFC Bank, and Nestle have seen fluctuations. The key is to focus on companies with strong fundamentals, consistent growth, and robust business models. But always be prepared for market volatility.

3. Which share to buy for 5 years in India?

For a 5-year horizon, focus on companies with strong fundamentals, consistent sales and net profit growth. Prioritize sectors like Consumer Goods, IT, Pharmaceuticals, and Financial Services. Research thoroughly, diversify across sectors.

4. How to select stocks for long term investment

To select stocks for long-term investment, Peter Lynch advises understanding the business thoroughly. We must favour companies that have a high profitability score. Prioritize stocks with solid financials and healthy balance sheets. Focus on buying undervalued stocks at reasonable prices.

5. Which are the 10 best shares to buy today for next 20 years?

For the next 20 years, one can consider shares of companies with strong market positions and growth potential. I’ll consider these shares for myself these type of stocks: HDFC Bank, Jio Finance, Britannia, Hindustan Unilever, Nestle. These firms are well-established and resilient.

GoogleNews - GetMoneyRich

More Related Articles

Method to Score Companies On Growth - Thumbnail

Method to Score Companies On Growth

Evaluating company growth is essential in direct stock investing. Fast-growing companies tend to offer higher returns and better investment opportunities.

Disclaimer: The information provided in my articles and products are for informational purposes only and should not be considered as financial or investment advice. Read more.

108 Responses

  1. Excellent analysis based on very good understanding of corporate values and contribution of good corporate governance for sustained growth of industries. Very educative and detailed explanations have been given of the industrial growth and the opportunities under various situations.

  2. My Bank FD of 10L is maturing this month. What’s the best way to invest this money. I am beginner in Stock Market.

  3. Hey I bought shares of United Drilling at. 244 after your suggestion …. Its 354 now!! Should i sell or hold?? Plz suggest target price

    Thanks in advance…. You rock!

  4. Dear sir
    Really this good information to public.
    But I don’t know how to purchase small quantity share for earning long term. I was loosen lot ,so encourage us.

      1. and give all the returns as fee to the advisor and enjoy with nominal return

    1. Invest in the ratio of 14% – 28% – 56% – Buy only when there is a minimum correction of 3% in high premium stocks and 5-10% correction in top class mid and small cap stocks
      You will make 20% yoy

  5. Hi Mani, always great to read your blogs. You shortlist a lot of paper industry companies but none of them seem to have a great forward looking price, is degrowth or stagnant nature of industry driving it?

  6. I am pleasingly baffled to see that 8/10 of the stocks have shot up since you posted this on 1st August 2020. I didn’t go through the process as I wanted to ensure if its analysis actually works. Apologies for saying it, but I am almost convinced that it does! Will spend this weekend understanding the article. Thanks a lot Mani!

    Regards,
    Ganesh

  7. Well researched and well explained. Thank you so much for this valuable information.

  8. You are such a wonderful person thanks for the info so useful May God bless you always.
    All these details of yours will help someone to become financially stable very nice

  9. Dear sir,
    I am new to the investment in the market and i would like to invest with a long term goal can you please advise.

  10. Hello Sir,
    Such an informative blog. I even followed you on Youtube and Now I am hooked in value investing.
    A question regarding this blog post is How did you identified these stocks from a long list of stocks available?

    thanks,
    Atul

  11. When i calculate the intrinsic value for Hindustan Zinc, it is way lower than the Market Price. Can you help me know what was your IV for Hind Zinc please?

  12. Hello Sir,
    I have been reading your blogs for a long time, thank you so much for sharing valuable information. Personally I like Dabur India, Infosys, Divi’s Labs, Pidilite Ind, Marico, TCS these stocks you have mentioned in the list, thank you very much

    1. Where can i get the breakup for the cash flows of the company? Like the cash flow from investing & financing activities? I could only get the totals without the breakup. Could you please help.

      1. Respective companies Annual Reports, which are uploaded on the companies’ website usually under investor Relations head.

  13. Hi sir, first of I want to thank you for creating such a useful content source to achieve financial freedom. I really enjoyed reading your blog.

    this is really helpful.

    sir, I am holding IRCTC shares @1150. What do you suggest to do with it I should hold or sell.

    will it fall further?

    1. leave it for while. after 1.5 year, u will remember me. it will boom. dont sell it. this is its monopoly business buitself.

  14. Hi Mani,

    Hope you and your family are safe.

    What is ideal amount of stocks to hold for these companies?

  15. It’s indeed a great information, Thanks for sharing such a detailed data to us. I was facing little challenge going through all the parameters in the company’s report, as a couple of parameters are named differently in an annual report than what you have mentioned here. I would love to buy your product but before that I would like to go over on my own to see how it works. Is there any email where I can reach you out for questions? Please email me your contacts to reach you out.

  16. Hi Mani,

    Thanks for sharing valuable expedition.

    Am new to share market. I started investing in Adani Greens, RVNL, REC and Ashok Leyland. Shall I continue ?

    Moreover what are the stocks which can grow after this pandemic Covid 19 effect?

    1. Hello
      I want to buy some share but I am new I don’t know about can you please help me with that like which share I can buy right now.

  17. hi,
    Can I know your feedback about the stock “Honeywell Automation Ltd.”
    BSE: 517174 | NSE: HONAUT | SERIES: EQ | ISIN: INE671A01010 | SECTOR: TELECOMMUNICATIONS – EQUIPMENT

    Advance Thanks…

  18. Hi Mani,

    I’ve your V 2.1.5.02 analysis worksheet. Does it have DCF as your version log says this update is done and released as 2.1.5.04.

    Also, nowadays Moneycontrol website has been updated and it is not displaying total number of shares in shareholding pattern. Is there any other source where we can get exact number of total shares.

    Have a great day ahead.

    1. Hi.
      You can go simplywall st.website & you will get every major share holder details.

  19. Lovely article. It gives great insight into Intrinsic value of a stock.
    I calculated IV using the following method:
    > I tried calculating Avg. g using the annual report of Britannia Industries from 2015-19.
    > FCFE of each year varies drastically and leading to g to bounce from -ve to 300% change.
    It gives a varied picture of Intrinsic value of that company. What is the range within which IV of a company can vary? Are there any examples of sky high IV?
    Thanks in advance. I would love to learn more.

  20. Mr.Mani,

    i have planned to put in stocks with an amount Rs.50,000 .if u dont mind can u tell which are the stocks to buy .will wait for 8 years .using this as investment

    1. Hi Mani,
      I too have same question.
      Looking to invest 50k to 1L in market for first time.
      Please suggest…the possible sectors & stocks.

      1. Just go for large cap MF units or niftybees if you dont know much about stocks…

  21. Hi

    If we buy undervalued stocks suggested by you then when shall we sell it? At what price?

  22. Hi Mani,
    I have been following your articles for more than a year. Recently I purchased STOCK ANALYSIS WORKSHEET V2.1.4 (PLUS). First congratulations on good work.
    I have couple of questions for you though as listed below:
    1. This article list L&T Finance as undervalued at 80.6 however when I entered data as advised in the video, I am getting intrinsic value as 53 and showing it as overvalued. Can you please advise?
    2. I have been holding Lupin shares for last 20 years. Purchased price is quite low. When I used the spreadsheet to get intrinsic value of Lupin it is showing approx. 919. Can you please confirm this price is correct and do you advise to keep it?

    1. Hi, the numbers shown in this article are based on a screener. These numbers are not as reliable. But they at least screen out the non-important stocks. I generally use my “Stock Analysis Worksheet” to do a more deeper analysis of my shortlisted stocks.

      1. Thank you.
        Can you please help me with question regarding Lupin? Thanks

  23. Basis the above my FCFE for Graphite India is coming out to be 1308 CR (using Annual report of FY18-19). However, in your post on best stocks (https://getmoneyrich.com/stocks-list/best-stocks/), you show Graphite India’s FCF as 2194.71. Not sure if it is because my inputs to different variables is incorrect. Would be super helpful if you can take a company’s example (for a specific FY) and show this.
    Also in new debt formula you mention “Note the numbers for ‘purchase and sale of capital assets’. Note the numbers mentioned against ‘Proceeds from borrowing’.”. Shouldn’t it just be proceeds from borrowing as purchase and sale of capital assets would be under investment activities

  24. I am novice on this, can you please explain how is expected return arrived at & also the data table in that section. Thanks

  25. Hi Mani,
    Really nice article. it’s great that you are sharing your watch list for others.
    I would also like to suggest one website ( you might be already knowing about it ) to pick up stocks for analysis. Website: screener. in/screens/ .
    On these screens one can write down query and get list of stocks based on our preferred criteria. Then they can use your stock analysis tool to get intrinsic value.
    Let me know your views on it. Thanks

  26. Hi to All, iam new to this feild .. if anyone can suggest few names to study and select shares to invest.. it will be helpfull ..

    1. there is nothing like help but more like pay and payee, if you have something to share then they will might share something to you. but it rarely the correct path.

      Look before you go and do it!
      —————————–
      nothing is free just like this blog!
      ————————————

  27. Could you elaborate on “Cash flow from financing Activity” esp. what all to consider under Proceeds from borrowings ‘E’ and repayment of borrowing ‘F’?
    I was calculating FCFE for Ashok Leyland and their “STATEMENT OF CASH FLOWS” has below

    Cash flow from financing activities
    Proceeds from issue of equity shares (including securities premium) 455.35
    Proceeds from non-current borrowings –
    Repayments of non-current borrowings (105,502.74)
    Payments relating to swap contracts on non-current borowings (11,633.48)
    Proceeds from current borrowings 924,000.00
    Repayments of current borrowings (933,863.78)

    Should i calculate like below:
    E Proceeds from borrowing (New Debt) From Report 924000
    F Repayment of borrowing (Debt Repaid) From Report -933863

    Thanks in advance! This article made me start looking into the sheets.

    1. Good work Ankit. Your assumptions are right related to “cash flow from financing activity”. Thanks for asking and putting your thoughts here.

  28. Hello sir,
    I was looking for some information on Best stocks to buy in India, this morning and came across your website.

    Great content! I especially liked how your website describes the topic in an easily understandable language which inspired me to write more up to date content on How to pick the best stocks for consistent returns and Top 10 best stocks to buy in India for the long term.

    Actually, I have published on the said topic with more insights and infographic which is quite beneficial for your audience.

    Let me know if you want to check it out.

    Either way, keep up the good work.

    Thanks,

    Jharna Majee.

  29. Sir, i checked the financial data for britania, but could not find the figures you mentioned above. have you used random numbers? when i did the calculation, the IV/share is less than Re 1. can you take a real example and explain the calculations. for our benefit, can you use financial figures from ndtv or economic times.
    thank you.

    1. I will suggest you to use moneycontrol. Generally numbers in financial reports will be similar whether we follow NDTV, economic times, etc. Thanks.

  30. This is a very good article, which gives a brilliant explanation on how to identify and select the best stock for investing. It also tells us how to identify the best stocks for beginners, as stock picking must be done with extreme care because picking up any random share without proper research will be a bad investment decision. This article also tells us that business whose future free cash flow is certain is a good business and market value of the stock must be less than its intrinsic value. Here the information provided is precise, resourceful and has its unique way of analyzing data and presenting it in a simple manner.

  31. With ref. to your post dt. 19th Sep. 2018 on Free Cash Flow Analysis of Indian Stock, AdanI ports is Undervalued. But your post dt. 24th Sep. 2018 on Best stocks to buy in India for Long term 2018, you have mentioned to avoid Adani Ports. Please clarify.

    1. –Good observation…
      The list provided in this blog post is result of a general “screener”. It is less detailed. But it helps me to quickly highlight few potential stocks from all.

      The analysis provided in “Free Cash Flow Analysis of Indian Stock…” is more detailed. It is based on 2 years data. Hence the reliability of that analysis is more.

      The point is, estimation of intrinsic value will differ from person to person. The variation will come based on:
      – Knowledge, skill of the analyst.
      – Data used for analysis.
      – Procedures used for analysis.

  32. Out of NIFTY 50 only 8 shares qualify your test. Now looking tersely, it can be said that though the intrinsic value is high these shares do not command good price.My be due to the bad methods in manufacturing, marketing, political reasons, lack of financial manipulation, risk taking etc.That means one should not buy those shares before the companies improve. When and how will that happen? They may not even reach the IV in long time like Karnatak Bank. There appears contradiction. Do you see the light?

    1. Market pice can be higher than IV. Its fair.

      But why IV is less than price? It is not always “due to the bad methods in manufacturing, marketing, political reasons, lack of financial manipulation, risk taking etc“….

      Stocks of great companies trade at overvalued price levels. But there will be moments in time when there will be price correction. The strategy should be, first know the true value of a good company. When this is established, wait for the market price to become favourable (it will be, one day soon).

  33. Your method seemed to be working in good old days before the IPO of Reliance Power and also when the shares of multinational were issued at nominal premium and when STT was not there.
    Who approves the shares prices of IPO and on what basis? Could that be rigged up? Why people invest without knowing anything.
    One of my Sr. broker who is no more, used to say that share bazar is a gambling den. That is an over statement but if everything is predictable, then you can never earn in share bazar because here they do not produce any goods or services and also they can not tax like Govt.
    Having said that, your method is quite interesting because it enables to find the element of speculation quantum in present share prices.
    Is there a software program sold by you which I can buy and on the top of that I apply my intuition?
    Congrets fr nice style and kind regards

    1. Share Market looks like a casino, but its not. At least for me, “shares” are not very different from the “business” it represents. This way of looking at stock market, helps in making more meaning out of stock investing.
      Thanks for a lovely comment.

  34. while calculating IV per share, i noticed that the nifty 50 stocks you gave also divide no . of shares by face value. Without this every stock seems overvalued… Mani please comment

  35. I tried to follow your steps to calculate FCFE. However, I am getting minor difference in the FCFE of nifty-50 stocks that you have mentioned. For ex, following are the values I took from Bajaj auto’s annual report 2017-18 (everything is in Rs. Cr). PAT = 4068.1, Depreciation & Amortization = 314.8, Purchase of capital assets = 182.63, Sale of capital assets = 13.13.
    Current asset, 2018 = 9,235.63 and current asset 2017 = 9,391.37 hence change in current asset = -155.74. Similarly, current liability 2018 = 4,111.29, current liability 2017 = 3,212.58 hence change in current liabiliity = 898.71.
    Proceeds from borrowing (new debt, I am assuming this is long term debt only that we should take) = 0
    Repayment of borrowing (again repayment of long term debt) = 0
    FCFE I calculated = 5267.85. FCFE you have mentioned in the table above = 5154.26
    I believe either I am going wrong in taking the captial asset sale/purchase or new debt vs repayment. Would be super helpful if you could help me with the same.

    1. The value mentioned in the blog are results out of a general “stock screener”. It has been used to bring forward potential stocks. A detailed analysis will surely give a different values than generated by the screener. Thanks for posting your comment. Good work.

  36. Hi, Thank you for such a detailed post on this topic which I was really looking for. I will use the steps for some of the stocks and I will share my views as well. BTW, normally, people will say that there will be exception when we do such analysis – for example, banks will be having more money which needs to be seen from right perspective (not as a free cash). Is there any such consideration while we use your above steps to analyze the stocks. Please clarify. Looking forward for your other posts to learn more. Thank you.

  37. Hi Mani Sir,

    I am a big fan of your stocks analysis sheet and thanks to you for that.

    I want to know that while putting the Balance sheet values in the sheet from moneycontrol, should I be picking the consolidated or standalone values (from moneycontrol). Please advise.

    Thanks

    1. Its better to use standalone data. It gives better idea about the core strength of the “parent business”.
      Thanks for your comment.

  38. The article was simple and lucid.I need one clarification.
    You have stated ‘A company relying too much on debt for its cash flow management will have lower FCFE”.But if a company borrows new debt its FCFE will rise.
    Seems contradictory…
    Kindly elaborate.

    1. Your observation is right. I have rephrased my sentence. Thanks for pointing out the contradiction.

    2. Hello
      I want to buy some share but I am new I don’t know about can you please help me with that like which share I can buy right now.

      1. Very helpful blog. I have one que.
        In blog page, list of share is different from “more stocks”s list. Shares at number 8,9, 10 in more stocks full list are shown at number 1,2,3 in main blog page. Can you please tell which list number is more reliable. I am so much confused everytime i see lists in blog page and more stocks full list page.

      2. Please treat this as serial numbers, not ranks. You will find it easier to comprehend.

  39. Very good article about how to choose a stock before purchasing the same. I have not come across such a detailed article before except an article on site of StockAxis.

    Very helpful.

  40. very good information about how to select the best stocks, how to make a portfolio. thanks

  41. I have purchased Karnataka bank shares 100 at Rs 155, as its Market price is lower than true value which is Rs 197. But from past three years Karnataka bank shares have not reached its true value Rs 197. Now what should I do?.

  42. This is the first time that I have read something very useful about stock investing. I am holding Man industries, Visesh infoteck, Havisha hosp & infra in my portfolio. Please give me some advice on this stock.
    Thanking you
    T.C.Raveendran

  43. This is a very good article to analysis market, & how to make own list . It’s really good to work. I m very impressed because to cover all fundamental reasons to choose our best stock.

Leave a Reply

Your email address will not be published. Required fields are marked *