In order to find best large cap stocks, attention shall be given to earning potential and market valuation of stocks.
Large cap stocks are the most favoured stocks of the market.
Investors would like to invest in best large cap stocks to get dual benefit of capital appreciation and portfolio stability.
Most large cap stocks also provides a possibility to earn dividend income.
So, investors whose objective is to buy high quality stocks, buying best large cap stocks at proper market valuation will be ideal.
Why large cap stocks are attracting attention?
The reason is logical and it will draw general agreement.
In recent times, the political stability in India is not so good.
Even the overall inflation may be at check but price rise of necessary goods and services are climbing fast and steady. .
Rupee is has devalued.
Corruption stories involving even the top leaders of country is common.
GDP growth rate is not was it was promised by the present regime.
Among all of these pessimism the biggest victim is common man and stock market.
The debt crisis in Europe and middle east country has also made the investors very tight lipped.
These are problem points for India. This crisis is not going to subside soon.
At present what we are seeing is a stock market index which has touched its peak and is on falling trend.
This is a time to buy?
In this situation, quality companies may be available at discounted price levels.
This is a very good time to identify best large cap stocks and include them in our portfolio.
In the backdrop where the market is in doldrums, there has been no devaluation of fundamental strengths of good companies.
Only due to global / local disturbances (like eurozone crisis, bad governance etc) their market value in plummeting.
For prospective investors next few months may give a good opportunity to grab some best large cap stocks.
Investors shall enter the market with a medium term investment horizon of 3/5 years.
Buy quality stocks now and hold them without thinking of selling for next at least 3 years.
The present market correction may not be as big as that of 2008-09. But for sure it will give a decent chance to value investors.
Sensex and its top stocks
Talking about SENSEX, which has been hovering around 30,000 – 33,000 levels in last 1 year.
Market has a probability of touching 28,000 levels in next 1 year time.
This is giving a good opportunity for investors to grab some quality large cap stocks.
The strategy is to buy large cap stock and stay invested for long term.
Such individual stocks may give even more return than averaged return of Sensex.
Idea to grab large cap stocks with high beta, when Sensex is falling. But careful stock analysis will be important.
Advantages of Large cap stocks
Here we will discuss about some good large cap stocks
For long term buyers, some stocks may give good dividend yield and, may be held for longer period of time.
There are some general advantages of investing in large cap stocks.
Some inherent advantages of large cap stocks are their strong financial health which is reflected in their Balance Sheet.
They enjoy a competitive advantage that other smaller companies lack.
In the present situation of market where the Sensex has fallen from 36,000 to 33,000 levels , these large cap stocks have the resilience to sustain even the worst of crisis.
So it is sure that these companies will eventually come out of these present price falls.
Large cap stocks shows quick value appreciation and will return back the investors money with profit.
But important is to pick these stocks when chips are down (market is falling).
In falling market, there are more chance of grabbing large cap stocks at discounted rates
In normal times these same stocks will always be available at overvalued price levels.
Free cash flow, Dividend…
The large cap stocks has great advantage of possessing excessive free cash that is increasing every year in normal times.
This is the reason why you will observe that these stocks pays continually increasing dividends year after year.
So if you are a income focused investor, probably valuing these large cap stocks in terms of their dividend yield will be much better.
The increasing dividend trend of such large cap stock makes them a good buy. They also have further advantage of dividend compounding in times to come.
Most of these large cap companies will also have operation in more than one companies, so you will not be required to worry about any specific currency (US or EURO) getting devalued or overvalued.
Some top performing large cap companies have already been listed in my previous article called as “Blue Chip Stocks”.
These stocks stocks have been evaluated in terms of their profitability, financial health and shareholders return in terms of hard cash (dividend).
Market price appreciation is not something that large cap stocks are know for, but dividend yield is for sure can be a good criteria of evaluation.
If one can time the purchase of a large cap stocks at high dividend yield levels, dual advantage of capital appreciation and high dividend income is assured.
- Market Capitalisation more than Rs 2,000 Crore (Rs 20 Billion)
- Annual Earning Growth (EPS Growth) of more than 20% in the span of last five years
- Current Price to Earning Ratio (P/E) shall be less than 20
- PEG of Less than 1
Best Large Cap Stocks in India 2018
(Updated on Apr’2018)
- Rallis India Ltd.
- eClerx Services Ltd
- Grasim Industries Ltd.
- Hindustan Zinc Ltd.
- Jagran Prakashan Ltd.
- Max Financial Services Ltd.
- National Aluminium Co. Ltd.
- Balmer Lawrie & Co. Ltd.
- Monsanto India Ltd.
- Ajanta Pharma Ltd.
Check this link to get a list of Top 50 large cap stocks with its price valuation in a tabulated form…
Disclaimer: All blog posts of getmoneyrich.com are for information only. No blog posts should be considered as an investment advice or as a recommendation. The user must self-analyse all securities before investing in one.