If you are an investor like us, you are not bothered about whether the markets are at an uptrend or at a downtrend. You are not bothered about short-term volatility. What you really want is to identify a blue chip company with excellent growth prospects, sound management and reasonable valued. Once you have these companies in your sights, all you have to do is use market volatility to your advantage. Every time the markets crash, you add these large cap blue chips to your portfolio and sit tight – confident that these blue chips will secure you a compounded annual growth rate (CAGR) of at least 25%.
Well, we’ve identified TEN such fail-proof large cap blue chips for you. These frontline stocks provide excellent downside protection and huge upside potential. Just go ahead and let your money earn for you:
ICICI Bank is the largest private sector bank in the Country. Its huge size and efficient management enables it to achieve an improved deposit (CASA ratio at 39.6%) and loan mix. The coming years will see a materially improved balance sheet and earnings. The Bank NIM (Net Interest Margin) will rise to 2.7% in the current fiscal (it was 2.6% in FY2009) and 2.8 to 3.0% over FY2011-12E. The asset quality is also showing signs of stabilizing, with gross NPAs declining sequentially for last 3 quarters.
State Bank of India
SBI is the largest public sector bank in India. SBI is always the first beneficiary when the appetite for credit improves. It has the largest branch network. Most of these are under the Core Banking Sector and contribute heavily to the bank’s profitability. The contributions from fee-based activities and consultancy are increasing. It is well capitalized. The loan book is well-diversified with no undue exposure to any particular sector.
In the Information Technology sector (IT), Infosys Technologies is the largest and best reputed company. The management has demonstrated stellar capabilities with a clear cut focus on sustainable growth, profitability and shareholder value. While the Infosys has seen short-term pressures on its margins owing to the cuts in the IT budgets of its clients, the global economic recovery will once again spur the demand for Indian IT services. Infosys is in the position to benefit because it has available in-house talent with a low-cost. Infosys’ focus on exploring business opportunities in new territories is also likely to pay rich dividends.
Reliance Industries Ltd
No portfolio can do without Reliance Industries Ltd (RIL), the largest private sector conglomerate in India. Reliance is engaged in a wide range of business activities. Reliance is the largest private sector company in the oil and gas sector. RIL has a significant presence in the upstream and downstream sectors. RIL has commenced gas production from the Krishna Godavari (KG) Basin and commissioned its new refinery. The exploration & production (E&P) business is also likely to contribute heavily to the fortunes of the company in the near future.
NTPC is the largest company in the power generation industry. NTPC has efficient operations and also large expansion plans. It enjoys high profitability. The long standing demand supply mismatch of power in the Country comes to the aid of NTPC because the utilization of its power plants will never be underutilized guaranteeing economic operational cost. NTPC is not a volatile stock and is not given to making violent fluctuations either way. NTPC can provide a lot of stability to a portfolio.
Maruti is a dominant leader is the automobile space. What augers well for Maruti is the increasing demand for cars in India. Further, Maruti’s widespread distribution network gives it an enormous competitive advantage over the foreign giants entering India. Maruti has more than 2,700 service outlets and about 600 + sales outlets spread across the length and breadth of the Country. Maruti also has a large presence in the export market apart from being a dominating player in the domestic market.
Tata Steel is the old war horse in the steel industry. Not only is it a leader in the steel industry but a true blue chip. Tata Steel is embarking on an expansion plan primarily at Jamshedpur where it expects to invest about Rs 1500 crores in H2FY10 and around Rs 4500 crores in FY11. It is expected that Tata Steel will maintain a growth in volumes of about 20 to 25%. It is also expected that Corus will being operating at 100% capacity by March 2010. This will obviously improve Tata Steel’s profitability.
In the pharmaceutical space, LUPIN is the favourite. It is primarily engaged in the branded generic business in USA where the margins are high. In the last six months, Lupin has taken advantage of the situation by acquiring rights for two products named Allernaze and Antara. Thanks to these acquisitions, Lupin’s US branded generic business is likely to increase to $149mn in FY2010. Lupin’s other initiative is to make a market for itself in the Oral Contraceptive market. This business does not have high competition though it is worth about $3bn. These initiatives are likely to bear rich fruit in the near future making Lupin a compelling buy. In the 3rd Quarter ended December 2009, Lupin reported 38% growth in consolidated earnings. The consolidated revenues witnessed a YoY increase of 29%. This growth was possible because of growth in the formulations business which contributes about 85% to the Lupin’s turnover. The sales in the US and European markets increased by 44%. The branded business in the US grew by 78% during the quarter. Lupin has two subsidiaries Kyowa in Japan & Pharma Dynamics in South Africa. While Kyowa contributed 12 % of the overall revenues and showed a growth of 13%, Pharma Dynamics reported a growth of 66% during the quarter. Lupin’s domestic formulations business grew by 21% in the Quarter. This business segment contributes 30% to Lupin’s sales.
Mahindra & Mahindra
Mahindra & Mahindra is the second must-have stock in the automobile sector. Its popular products Xylo, Scorpio and Bolero are money-spinners. It has a strong management with a proven track record. It also has a diversified product portfolio. The balance sheet is quite attractive with comfortable debt-equity ratio. M&M Has diversified into the aerospace and defence sectors. The margins in these sectors are high. M&M can be expected to have strong volume growth in the coming few years thanks to the slew of new launches in the medium & heavy commercial vehicle (M&HCV) segment and a new SUV proposed in FY 2010-11.
Tata Consultancy Services
TCS is the second biggest player in the Information Technology (IT) sector. Top quality management and impeccable credentials. TCS delivered strong Q3 results on all financial parameters. Its Earnings per share was Rs 9.2 and this was up 10.7% QoQ and 32.9% YoY. TCS has ambitious plans for the next few financial years.