5 Best Blue Chip Stocks to invest in India now

Best Blue Chip Stocks to invest in India now in 2016Best Blue Chip Stocks to invest in India now


One of my next financial goals is to create another one Crore in the medium term of 3-5 years. In the process, I am identifying several best investment plans which can double or triple my money. Some investment options can provide superior returns. One among them is the identification of a few blue chip stocks to invest now for medium to long term to get superior returns. Which are the best blue chip stocks to invest now? What parameters I have considered to identify blue chip stocks for medium to long term investment?

How I identified these  Blue Chip Stocks for medium term to long term investment?


Blue chip stocks are those which has consistent growth along with stable returns. These blue chip stocks would create wealth over a period of time. They would be a little slow, however, provide consistent returns to investors.

Also Read:  Which are the best best Investment Plans in India?

Here is how, I identified blue chip stocks for investment.

a) Annualized earnings growth in last 5 years: Filtered companies which are consistently growing in terms of earnings. An Annualised revenue growth of more than 20% is considered as the best way to identify a good stock.

b) Debt – Equity Ratio of < 2: This is the ratio of company financial leverage calculated by dividing total liabilities by shareholders' equity. Means for every Rs 1 of investment by shareholders, there should not be more than Rs 2 of liabilities. The lower the ratio, the greater the chances that this company is able to manage the funds within own sources.

c) Average ROE > 20%: You can consider stocks where the average Return on Equity (RoE)  is > 20%. Return on Equity is nothing but the Net Income over the shareholders' equity. Picking up stocks which have > 20%.

d) Interest coverage ratio >2: Interest coverage ratio is the ratio used to determine how easily a company can pay interest on the outstanding debt. Interest coverage ratio = CBIT / Interest expenses. Any company where the interest coverage ratio is lower than 2, the performance of such company is questionable. Such companies struggle to make the interest payment from profits and such profits would decline year on year.

e) Market capitalization > Rs 3,000 Crores: Market capitalization is the total value of company outstanding shares. It is the simple arithmetic of outstanding shares issued by the company at market value. Any company where the market capitalization of > Rs 3,000 Crores can be considered as a blue chip stock. The higher the market capitalization, the higher the confidence in such company as they would have grown over a period of time.

f) PEG < 1.5: Price to Earnings growth (PEG) is key ratio that is used to determine the time it would take for an investor to double the money with such stock investment.

5 Best Blue Chip Stocks to invest in India now

1) Adani Ports and Special Economic Zone – CMP Rs 252


Adani Ports and Special Economic Zone Limited is India’s largest private multi-port operator. APSEZ is a part of the Adani Group, an integrated infrastructure corporation.

Annualised earnings growth in the last 5 years should be > 20% – Actuals are 21.5% – Test Passed

Debt Equity Ratio should be < 2. Actual is 1.73 – Test Passed

Interest coverage ratio should be >2 – Actuals are 3.9 – Test Passed

Market capitalization should be Rs 3,000 Crores – Actuals are Rs 55,336 Crores – Test Passed

PEG should be < 1.5 – Actuals are 0.84.

Adani Ports Stock price has potential to go up and can be considered as one of the best Blue Chip Stocks for medium term investment.  

Also Read: Top midcap Stocks that can double or triple your money

2) Apollo Tyres – CMP Rs 222


Apollo Tyres Ltd is the world's 17th biggest tyre manufacturer, with annual consolidated revenues of Rs 117.1 billion in March 2016. It was founded in 1976. Its first plant was commissioned in Perambra, Thrissur, Kerala.

Annualised earnings growth in the last 5 years should be > 20% – Actuals are 20.08% – Test Passed

Debt Equity Ratio should be < 2. Actual is 0.24 – Test Passed

Interest coverage ratio should be >2 – Actuals are  16.7 – Test Passed

Market capitalization should be Rs 3,000 Crores – Actuals are Rs 10,962 Crores – Test Passed

PEG should be < 1.5. Actuals are 0.49.

3) KRBL – CMP Rs 251


KRBL Ltd. is India’s first integrated rice company with a comprehensive product chain.

Annualised earnings growth in the last 5 years should be > 20% – Actuals are 23.78% – Test Passed

Debt Equity Ratio should be < 2. Actual is 0.71 – Test Passed

Interest coverage ratio should be >2 – Actuals are  7.8 – Test Passed

Market capitalization should be Rs 3,000 Crores – Actuals are Rs 6,456 Crores – Test Passed

PEG should be < 1.5. Actuals are 0.8.

4) Mindtree – CMP Rs 487


Mindtree Limited is an Indian multinational information technology and outsourcing company headquartered in Bangalore, India and New Jersey. Founded in 1999, the company employs approximately 16,500+ employees with annual revenue of $700+ million.

Annualised earnings growth in the last 5 years should be > 20% – Actuals are 36.17% – Test Passed

Debt Equity Ratio should be < 2. Actual is 0.02 – Test Passed

Interest coverage ratio should be >2 – Actuals are  2,592.3 – Test Passed

Market capitalization should be Rs 3,000 Crores – Actuals are Rs 8,639 Crores – Test Passed

PEG should be < 1.5. Actuals are 0.41.

Mindtree Stock price has good potential to go up and one can invest as part of their investment portfolio.

Also Read: Best Real Estate Stocks to buy now in 2016

5) Sun Pharma Ltd – CMP Rs 741


Sun Pharmaceutical Industries Limited is an Indian multinational pharmaceutical company headquartered in Mumbai, Maharashtra that manufactures and sells pharmaceutical formulations and active pharmaceuticals.

Annualised earnings growth in the last 5 years should be > 20% – Actuals are 24.5% – Test Passed

Debt Equity Ratio should be < 2. Actual is 0.27 – Test Passed

Interest coverage ratio should be >2 – Actuals are  15.2 – Test Passed

Market capitalization should be Rs 3,000 Crores – Actuals are Rs 189,231 Crores – Test Passed

PEG should be < 1.5. Actuals are 1.23.

Sun Pharma is somewhat disappointed investors in the last 1 year. However, I feel it has good potential to go up now and one should invest it for medium to long term investment perspective.

Readers, what do you feel about these top blue chip stocks to invest? Do you agree that the parameters considered by me are good? Would you like to add any other key parameter?

If you enjoyed this article, share it with your friends and colleagues through Facebook and Twitter.

Suresh

Best Blue Chip Stocks to invest in India now

21 comments

Leave a Reply

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