Blue Chip Stocks - Indian Economy
Introduction
Blue-chip stocks are the shares of very large, well-recognized companies with a lengthy history of sound financial performance. These equities are valued for their capacity to endure challenging market circumstances while also generating significant profits during favorable market conditions. Since they have a stellar reputation and are typically market leaders in their industries, blue chip stocks are expensive.
What Do Blue-Chip Businesses Do?
• A blue-chip business is one that enjoys a widespread reputation for excellence, dependability, and profitability in both favorable and unfavorable economic conditions.
• These companies have a solid track record of managing their finances and generating revenues while taking on relatively little debt.
• These companies are regarded as stable because they have been around for a while.
• Blue Chip examples include: Bharti Airtel Ltd., BPCL, Dr. Reddy, HDFC, Reliance Industries Ltd., Infosys Technologies Ltd., and ICICI Bank Ltd. are examples of blue-chip businesses.
Features Of Blue Chip
The characteristics of these businesses are as follows:
• Blue-chip stocks offer assured returns in the form of dividends, which are distributed on a quarterly basis. The reality that for the majority of investors, well-established businesses represent a secure investment opportunity.
• Creditworthiness: Blue-chip companies have enough cash on hand to quickly pay their debts. As a result, the shares issued by these companies are highly creditworthy.
• Risk: Compared to other kinds of equities, blue-chip stocks have a reduced risk factor.
• Investment horizon: The majority of investments are undertaken over a seven-year or longer time frame. Blue-chip stocks are excellent for achieving long-term financial objectives due to their long investment horizon.
• Growth Prospect: Blue-chip companies are significant businesses that have maximized their capacity for growth. The blue-chip stocks in India, which have been rising over time, are affected by this.
• Taxation: Section 80 C of the Income Tax Act in India requires earnings from blue-chip stocks to be reported as income.
Importance
• Because they frequently offer consistent returns, blue chip stocks are regarded as reliable long-term investments. Higher stock prices and lower yields typically offset this perceived lessened risk.
• By purchasing their shares, investors can make direct investments in well-known corporations.
• Investors can also choose from a variety of blue-chip equities through derivative blue chip products.
• A kind of diamond are blue chip instruments, often known as exchange-traded securities.
Conclusion
A blue-chip business is one that is well-known, stable, and established. Because they have a history of success and steady growth, blue-chip corporations are seen as safer investments. However, as the collapse of Lehman Brothers and the effects of the financial crisis on General Motors show, blue-chip stocks are nonetheless susceptible to market instability and failure.