Blue Chip Companies

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You can often find the term Blue Chip companies commonly thrown in conversations among investors. It wouldn’t be an exaggeration when we say, investors would literally “kill” for an opportunity to invest in these companies. 

These are the companies that stand on top of the pile in their sectors. They have a proven record of growth in the market and have been around for years on years.

These are trusted, household names whose products, services are loved by millions.

Investing in the stock market is all about making the right decisions, from choosing the right stock broker to choosing the right stock to invest in.

While there are many definitions for the term “Right Stock”, however, they usually mean stocks of Blue Chip companies.

A stock market is an ever-changing place where almost anything and everything can go wrong, however, investing in blue chip companies stock does no one wrong. 

These companies have a strong financial backbone, are usually debt-free which is great news for investors who are planning for goal based investing in India.

This means they needn’t worry about these companies sinking during tough times such as recessions, stock market crash in India, etc.


Blue Chip Companies Of India

We know it’s quite a cliche to associate the term risky with stock markets but we feel the fact just can’t be stressed enough.

Amid all the risk possessed by the stock market, an Indian investor’s initial instinct will be to invest in blue chip companies of India.

The one who is a less risk taker can invest in blue chip companies, investing in these companies will lead to stress free trading only if a proper strategy is adopted.

The Indian market has grown over the years because of the subsequent rise of Indian domestic companies to gaining the status of a multinational company.

This has invited much attention as well as huge investments from foreign investors. 


List of Blue Chip Companies

The list of blue chip companies refers to the top companies listed. on the 2 major stock exchanges – National Stock Exchange (NSE), Bombay Stock Exchange (BSE). 

Recent times has seen many Indian companies take the globalization route to expand their market reach and enjoyed great success while doing so. 

There are biggies such as TCS, Birla, Reliance that everyone would expect to be on the list as their global recognition has only led to strengthening their foothold in the domestic markets.

Since the two indices differ in terms of capacity there are chances that some names might not feature on one or the other, however, as far blue chip companies are concerned, the list pretty much remains similar.


Blue Chip Companies in NSE

The blue chip companies in NSE can be found listed on the market index Nifty 50. Nifty 50 companies list depicts the statistical performance of the top 50 companies performing well as compared to others thus helps you in finding the best stocks from the list of 1600 companies listed in the exchange.

Here we list the top 10 blue-chip companies listed on NSE :

  1. Reliance Industries Limited
  2. Tata Consultancy Services Limited
  3. Hindustan Unilever Limited
  4. HDFC Bank Limited
  5. Housing Development Finance Corporation Limited
  6. Infosys Limited
  7. Kotak Mahindra Bank Limited
  8. Bharti Airtel Limited
  9. ITC Limited
  10. ICICI Bank Limited

Blue Chip Companies BSE 

Whereas, traders can look up blue chip companies in BSE from BSE Sensex. Below are the top 10 blue chip companies on BSE : 

  1. Reliance Industries Limited
  2. Tata Consultancy Services Limited
  3. HDFC Bank Limited
  4. Hindustan Unilever Limited
  5. Infosys Limited
  6. Housing Development Finance Corporation Limited
  7. ICICI Bank Limited
  8. Kotak Mahindra Bank Limited
  9. Bharti Airtel Limited
  10. HCL Technologies Limited

Blue Chip Companies Meaning

The term “Blue Chip” has its origin from the game of Poker, where Blue chips tend to have the most value. 

Likewise in the stock market, the meaning of “Blue Chip Companies” is the most reputed, well-established companies who enjoy the trust of investors and greater financial and organizational stability. 

The giants of the Indian market – Infosys Technologies LTD, Bharti Airtel, State Bank of India are some of the blue chip companies. 

The term originally found its way into the investment world through Oliver Gingold who worked at the giant American publishing firm, Dow Jones.

While standing near a stock ticker, Gingold noticed certain stocks trading upwards of $200 for every share and termed them as “Blue Chip Stocks” in reference to the blue chips of a poker game.

The Blue chip companies, more or less refer to the top 100 companies listed on a stock exchange. 

Hence, another way to look at them is that these are the most sought after companies on the stock market because of their better performing quality stocks. 


Meaning of Blue Chip Stocks

Blue Chip Stocks” simply means the listed stocks of blue chip companies. As these generally perform better than other listed stocks, hence they remain at the top of the list of investment options for investors.

The prospect of better stability, better growth potential, and an added bit of safety are what attracts investors towards investment in these stocks. 

These companies have been around for many years and have established themselves as a “Brand”, who everyone would like to associate with. 

Blue chip company stocks are more liquid by nature because of their huge quantity of trades. Liquidity is a great measure of a stock’s ease of trading. 

However, blue chip company shares have a downside that these are expensive in comparison to other stocks because of the very fact that these remain high in demand.

Every investor would like to invest in safer stocks and hence are willing to pay higher sums for the luxury.


Blue Chip Companies Benefits

Investing in blue chip companies is a lucrative prospect because of all the benefits it has to offer to investors :

  1. Passive Income – One of the biggest benefits of investing in high performing blue stock companies is that it can help investors generate a regular source of passive income. With blue chip company shares, you can invest and forget. 
  2. Greater Returns – As the blue chip companies stocks are comparatively more stable than others, they can in turn ensure greater profits on the investment. These companies tend to grow with time and hence an investor is more likely to profit from staying invested in the long term.
  3. Safer Option – Blue chip companies have earned a reputation in the market over time and their stocks usually are able to endure tough periods such as stock market crashes, catastrophes, etc.
  4. Dividends – Since blue chip companies are well-reputed names in the market they cannot risk any delays in paying out the dividends to their shareholders. They follow a well-defined dividend policy.
  5. Competitive Edge – Blue chip companies are leaders of the market. Every investor knows about them or at least has heard about them. Their stocks perform better than others because of them being among the most reputable brands. 
  6. Higher Liquidity – Blue chip company shares remain high in demand as more and more investors want to leverage the greater level of security they offer. Since they are traded most often they are more liquid in nature. 

The high liquidity of a stock depicts the ease in carrying out trade. These stocks are fairly easy for traders to buy and sell. 

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Blue Chip Companies Disadvantages 

Although investing in blue-chip companies is a lucrative prospect, they too have some disadvantages. Some of them are noted below:

  1. Expensive – The only downside of investing in blue-chip company shares is that they are way more expensive than all available options. The stocks of blue chip companies are priced at high rates because these companies have a well-proven track record of appreciating over time.

This growth over time translates into huge profit potential for investors and thus stays highly in demand. Subsequently, these are priced higher than other stocks.

  1. Less Volatile – Intraday trading solely relies on stock price fluctuations. Since blue chip stocks generally tend to stay stable in their financial positions an intraday trader can not make profits by trading them. 
  2. Low Returns – Blue chip companies although ensure regular returns to investors, but the returns are low in numbers. For maximizing profits, a trader will need to stay invested for longer periods. 

Conclusion

Investors would jump at the first chance they get to invest in blue chip companies. The reason why there’s a fight among investors for investing in blue chip company stocks is the fact that these stocks offer a reasonable amount of stability.

Examples of Blue chip companies include Infosys Technologies LTD, Bharti Airtel, State Bank of India, Reliance Industries Ltd, Asian Paints, HUL, ITC, etc. 

Thus, blue chip companies can be looked at as large-cap companies whose stocks perform better than others and most probably will grow in years to come.

These are well-established names in the market and their stocks tend to remain unaffected by stock market crashes.

This makes them hugely popular amongst investors but a poor option for traders who would like to make quick shot lump sum money.

Intraday traders for instance take advantage of the stock market irregularities to earn profits on investments.

Investing in the companies can be a great source of regular passive income, however, the returns aren’t as significant as a trader can earn by investing in other options. 

Moreover, these are comparatively more expensive than other stocks because of all the investor rush.

But on another note, these can ensure great returns in the longer run for an investor as these companies’ value is more likely to appreciate over time.

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