5 Bluechip Stocks That Could Bounce Back in 2025

The correction in the stock market has dampened the sentiment among many investors.

If retail investors were to remain pessimistic in the short term, the market could get struck around these levels, with the possibility of some more limited downside.

We said that you could think of this period as the pause before the next leg up of the rally...and that such pauses are perfectly normal in a bull market.

We at Equitymaster, believe the bull market is not under threat and long-term investors have nothing to worry about. It's just that, in the short-term, there could be some volatility.

In spite of the market volatility, bluechip stocks have the ability to bounce back fast. This makes them low-risk investments. They are like go-to stocks for investors of all kinds, beginners or experienced.

Turbulent times call for bluechips stocks to come to the rescue. But if the entire market were to continue its rise, then these stocks have a good chance of outperforming the broader market based on valuation upside alone.

Only time will tell, and investors should be ready for any eventuality. In the stock market, it's better to prepare than predict.

We believe, investors would do well to invest in high quality stocks for the long term. By high-quality stocks, we mean solid bluechips that have stood the test of time.

What are Bluechip Stocks?

Bluechip stocks are well-established and financially sound companies that could weather turbulent times. They deliver moderate yet consistent returns for their shareholders.

These companies are leaders in their respective sectors and are also household names. These stocks attract all kinds of investors irrespective of their experience with the stock markets.

Bluechips have clean accounts, prudent capital allocation, and strong competitive advantages, making them the perfect low-risk route to generating long term wealth. They also pay generous dividends.

Their consistent increase in revenue and profitability, stability in margins, cash flows, and dividends are all very desirable traits for investors.

The stock prices of such companies' usually compound over time as the market rewards them for their consistent performance.

Buying the safest, sturdiest, and most well managed bluechip stocks, when the market turns upwards, can be a good profit making opportunity. Doing so, when everyone else is either selling or sitting on the fence, can put you in an enviable financial position for decades to come.

So be prepared for the bluechip comeback in 2025. Keep your bluechip watchlist handy.

In this editorial, we will look at the top 5 bluechips you should have on your watchlist.

#1 Hindustan Zinc

Incorporated in 1966, Hindustan Zinc has a rich experience of more than five decades in zinc-lead mining and smelting.

The company was incorporated as Metal Corporation of India in 1966 as a public sector undertaking. Today, it's a subsidiary of Vedanta Limited which owns 64.9% stake in it. 29.5% stake is owned by government of India.

Due to its excellent cash generation history, it's a well-known dividend stock having paid out more than Rs 700 bn in dividends since 2013. The dividend payout for FY24 was 70.79%. The 5 year average dividend payout stands at 141.52%.

It's debt is also moderate with a debt to equity ratio of 0.3 at the end of FY24. The company's return on equity (RoE) and return on capital employed (RoCE) in FY24 were 51.1% and 57.9% respectively.

Hindustan Zinc, the world's second-biggest zinc producer, operates the world's third-largest open-pit mine and the world's largest zinc mine in Rampura Agucha, Rajasthan. The company is also one of the lowest cost producers of zinc globally and is India's only Integrated producer of zinc, lead, and silver.

Going forward, Hindustan Zinc is planning to explore, discover, and develop mineral blocks, with a focus on critical, deep-seated, and offshore resources.

It intends to among the companies submitting bids for critical mineral blocks such as copper, lithium, nickel, cobalt, and other rare earth minerals.

To achieve this, Hindustan Zinc has established a wholly-owned subsidiary, Hindmetal Exploration Services Pvt Ltd, aimed at systematically exploring mineral deposits.

This subsidiary is expected to become operational within the next few months. Specific areas for exploration will be identified over the coming months.

To know more about the company, check out Hindustan Zinc's factsheet and quarterly results.

#2 Tata Motors

Tata Motors is the automobile arm of the prestigious Tata Group.

It's a US$ 34 bn organisation and a leading global automobile manufacturing company. Tata Motors offers an extensive range of integrated, smart, and e-mobility solutions.

The company designs manufactures, assembles, and sells passenger, utility, commercial vehicles, and defence equipment. It also offers vehicle financing, car service, spare parts, and accessories.

The company's main operational hubs are India, the UK, South Korea, Thailand, South Africa and Indonesia. It also has centres of design excellence in Italy and the UK.

Its vehicles are sold in over 100 countries around the world, especially in India, Africa, the Middle East, South and Southeast Asia, Australia, and South America.

Tata Motors has an established presence in the global luxury car market via its subsidiary Jaguar and Land Rover (JLR). The company is also a market leader in the commercial vehicle segment.

The company's main focus recently has been EVs. It has a leading market share in India's passenger electric vehicle (EV) segment. Its domestic EV brands have become a common sight on Indian roads such as Tata Punch, Nexon, Tiago and Tigor.

Given the immense popularity of its brands, Tata Motors plans to grow its EV business aggressively. It plans to drive up EV penetration to double digits by launching ten new EVs by 2026.

The company has also unveiled TATA.ev, its new brand identity for the EV market. It's well-placed to maintain its dominance in the India EV market.

As the world transitions from conventional vehicles to EVs, Tata Motors will make a name for itself globally, just as it has already done in India.

The company is taking a big step towards EV push and expanding its Sanand plant in Gujarat.

The Sanand plant is Tata Motors' largest manufacturing facility in India. It currently produces a wide range of vehicles which includes the Tiago, Nexon, and Altroz.

The expansion of the Sanand plant will see the addition of a new lithium-ion battery production facility, expected to be operational by as early as 2025.

The Tata Group's investment in lithium-ion batteries is part of its broader strategy to transition to electric vehicles. The company is also working on developing its own electric vehicle charging infrastructure.

As supply constraints ease and demand rises in the latter half of FY25, Tata Motors remains vigilant about global market conditions, especially in China and Europe.

By balancing growth initiatives with careful resource management, Tata Motors is positioned to address immediate challenges while setting the stage for sustained, long-term growth.

To know more about the company, check out Tata Motors' factsheet and its latest quarterly results.

#3 HAL

Hindustan Aeronautics Ltd (HAL) is in the business of manufacturing aircraft and helicopters and their repair and maintenance. The company highly depends on contracts from the Indian Ministry of Defence (MoD).

HAL plays a strategic role in India's defence program being the only Indian company having specialisation in aircraft manufacturing, maintenance, and related services. It serves various clients, including the army, navy, Indian air force, Indian coast guard, and DRDO.

The company's future is secure with multiple large orders. As of FY24, HAL had an order backlog of Rs 940 bn which could surpass Rs 1.2 trillion.

The cabinet recently approved a Rs 260 billion (bn) procurement order for 240 aero engines for Su-30 MKI aircraft. This will be executed by HAL. The company is also expected to receive a new order from the Indian Air Force (IAF) for 97 additional Tejas light combat aircraft (LCA Mk-1A).

HAL recently signed a contract with SAFHAL helicopter engines for the joint design, development, and production of a new engine called Aravalli for India's IMRH program.

Apart from this, the company has a deal on its cards with a US firm GE Aerospace for the joint production of F414 engines in India.

Going forward, the long-term order pipeline continues to remain robust with projects like Tejas MK II, AMCA, TEDBF, IMRH, LCH, and ALH and are expected to provide HAL with a business opportunity of Rs 4,500 bn over the next decade.

To know more about the company, check out HAL's factsheet and quarterly results.

#4 IOC

Indian Oil Corporation Limited (IOC), a prominent Government of India undertaking, was formed in 1964 through the merger of Indian Oil Company Limited and Indian Refineries Limited.

Today, the corporation operates through five key divisions, including its refineries division, boasting the largest share of India's refining capacity at 70.25 million metric tonnes per annum (MMTPA), with plans to increase capacity to 87.9 MMTPA by 2024-25.

The company holds approximately 31% of India's national refining capacity. It owns and operates 11 of India's 23 refineries.

IOC's infrastructure is vast, with 9 refineries that convert crude oil into essential fuels like petrol and diesel, a 20,000-kilometer pipeline network for fuel transport, 99 LPG bottling plants, 129 aviation fuel stations, and over 61,000 customer touchpoints, such as petrol stations and LPG agencies.

IOC is the second largest player in the domestic petrochemical market in the country and a key exporter, supplying these products to over 70 countries worldwide.

IOC is now exploring the green hydrogen space.

The management believes that oil will continue to be a dominant fuel for the next few years, but they are preparing for a transition, which will involve a combination of green hydrogen and biofuels.

IOC plans to produce hydrogen by using solar energy, biomass gasification and bio-methanation, making it even more cost-efficient and cleaner.

In line with its transition plans, the company plans to set up a 7 KTPA (kilo tonnes per annum) electrolysis plant in its Panipat refinery for Rs 20 bn by 2025. A notable objective includes converting 50% of its hydrogen production to green hydrogen by 2030.

To know more about the company, check out IOC's factsheet and quarterly results.

#5 Hero MotoCorp

Hero MotoCorp is one of India's first motorcycle manufacturers. The company started in 1984 as a Technological collaboration with Honda, Japan. Before this, Hero was selling cycles under the brand name, Hero Cycles.

The company is the world's largest manufacturers of 2 wheelers in terms of unit volumes sold by a single company in a calendar year for more than two decades.

The company has some strong brands under its names like Splendor, Passion, Glamour in the bike segment and like Pleasure, Maestro in the scooter segment among others.

Hero MotoCorp also sells electric scooters under the brand name Vida with a real-world range of 110 km per charge. It holds 37% of the market share in the two-wheeler category.

The company has a network in 100+ cities with 850+ stations, and 2,000+ charging points. Hero has the largest charging network in the country for 2 wheelers.

Hero MotoCorp stands to benefit out of Ather Energy's IPO as the company holds a 39.7% stake in Ather Energy.

A few months ago, the company purchased an additional 2.2% stake in the electric scooter maker for Rs 1.3 bn taking the total valuation of Ather at roughly Rs 56.4 bn. The total value of Hero's stake in Ather Energy stands at Rs 22.4 bn.

In FY24, the company's sales and net profit 10.6% and 33.7% on a year-on-year (YoY) basis. The company generated strong cash flows from operations of Rs 49 bn which was up 88.3% YoY.

The company is debt free with strong return ratios. The return on equity (ROE) improved to 21.2% during FY24, from 16.8% during FY23. The return on capital employed (ROCE) improved to 29.3% during FY24, from 23.8% during FY23.

To know more about the company, check out Hero MotoCorp's factsheet and quarterly results.

Happy investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...