20 Stocks to Watch in 2025

You see, in the stock market, there is trading and then there is investing.

Investing is buying undervalued stocks. Trading is buying from A and selling to B at a higher price.

Traders do not care if the stock is undervalued or overvalued. They care whether the stock is up trending or down trending.

Talking of trends, have you studied the monthly trend of the stock market?

In other words, if the stock market has gone up the previous month, will it go up in the current month or will it go down?

Likewise, if the market has gone down in the last month, will the downtrend continue, or will there be a reversal?

You see, back in 1933, two gentlemen, Alfred Cowles III and Herbert Jones, undertook a massive study to find out.

Cowles and Jones went the extra mile and analysed data going back 100 years.

Yes, they went through 100 years of data - in an era where there were no computers. Commendable indeed.

When the results came out, they were beyond expectations.

The data revealed that there was a 63% chance if the market had gone up in a given month, it would go up the next month, or, if it had gone down, it would continue to go down for another month.

So, if you are a trader and you must bet between a stock that has gone up in the previous month versus the one that has gone down, you'd be better off buying the one that has gone up.

Betting on a continuation of a trend would have yielded better results than betting on short term reversals.

Deeper analysis revealed that this could be the winning formula in the stock market.

Unfortunately, not many investors and fund managers capitalised on this finding.

They were too busy following other types of investing like value investing and growth investing or they were busy applying the modern portfolio theory and the efficient market hypothesis.

In fact, it was only in the 1990s that the findings of Cowles and Jones came back into the limelight.

This time however, there was no looking back.

The return of this strategy could be traced to the year 1993 when another pair of gentlemen, Jegadeesh and Titman, published their work on what came to be known as momentum investing.

Here's their finding in a nutshell.

• Strategies which buy stocks that have performed well in the past and sell stocks that have performed poorly in the past generate significant positive returns over 3-12 month holding periods.

If you want to earn market beating returns, then a portfolio of stocks comprising winners of the past 3-12 months is an option worth considering.

Jegadeesh and Titman study on momentum opened the floodgates for both research as well as investment based on this phenomenon.

Soon, there were detailed papers that studied momentum across asset classes, geographies, and time periods. And in almost all of them, the momentum effect was alive and kicking.

Buying past winners pays off. The strategy is effective enough to generate market beating returns over the long term. Yes, that's correct. With momentum investing, you have a very good chance of outperforming the market over the long term.

Please note that momentum investing is not a comfortable strategy to follow.

For the simple reason that it is not easy to buy a stock at Rs 200 when only a few months back it was trading at Rs 100.

It is like buying your favourite pair of jeans at Rs 2,000 but ignoring it when it was available at Rs 1,000 a few months ago.

Be it stocks or clothes, no one likes to buy them after a significant price rise.

I know this sound illogical. However, as Jegadeesh & Titman found out, if stocks have gone up for six months to one year, they keep going up for at least another few months, before starting a reversal.

Therefore, if one bought these high momentum stocks and held them for a few months, there are market beating returns for the taking.

But why do stocks keep going higher after they have been up for a while? What explains the momentum effect?

One explanation that I found convincing is that momentum investing works because investors underreact to good news. They take time in adjusting to the new reality.

Allow me to explain.

Say a pharma company comes out with a new drug that has the potential to give a huge boost to its profits.

Now, the stock price of this company will not double or triple overnight.

It will usually take few months or even a couple of years for the investors to adjust to this new reality and bring about a massive rerating of the stock.

This allows momentum investors to climb aboard the rising stock and ride the upside. It is this under reaction that gives momentum investing its long-term edge.

Well, investors the world over, seem to have no problem in believing in the power of momentum investing.

Every hedge fund, many ETFs, and financial institutions of all kinds have some or the other momentum strategy as a core theme these days.

In fact, it has grown in popularity in India as well. A lot of momentum offerings have come up in the last few years.

Therefore, if you find investors scanning the 52-week high list instead of the 52-week low list, you can be quite sure they are momentum investors trying to take advantage of one of the biggest anomalies in finance.

Ok, enough about theory. Let us move to practice now.

Every Rs 100 invested in a momentum strategy back in December 2013 would have multiplied 12x, turning into more than Rs 1,200 as of 31 October 2024. This translates into an impressive CAGR of almost 26%.

As you can see, the momentum strategy has outperformed both the BSE Sensex as well as the BSE Small Cap index by a significant margin during the same period.

In fact, it has outperformed the Sensex by more than 3x, putting in a much better performance than the blue-chip index.

There's no denying that the midcaps and smallcaps have stolen the show in the last 10 years. The momentum strategy, however, has done even better than these stocks.

While the BSE Small cap index has multiplied investor money by 8x, the momentum strategy has done 50% better and has given 12x returns.

Thus, momentum has certainly demonstrated its power in the last decade in the Indian stock market.

Here are the rules of the simple momentum strategy that gave 12x returns over the last decade.

Out of the entire universe of listed stocks, select the top 30% with the strongest momentum i.e. the top 30% stocks with the highest returns over the last one year.

Remove those stocks that do not have a revenue of at least Rs 200 crores and an average liquidity of at least Rs 10 lakhs over the last 12 months.

In other words, only keep those stocks with minimum revenue of Rs 200 crores and avg daily liquidity of at least Rs 10 lakhs.

Out of the stocks that remain, select the top 20 based on their balance sheet strength i.e. debt to equity ratio. The lower the debt-to-equity ratio, the better.

The idea is to form an equal weighted portfolio of 20 stocks with annual rebalancing. We buy the group of 20 stocks on 31st December, hold them for a year and then sell them on the next 31st December.

And from the proceeds, we buy another set of 20 momentum stocks and again hold them for 1 year.

Please note that there are various permutations and combinations around the momentum period chosen as well as the holding period.

Some investors like to hold for only 3 months and then again buy a fresh set of 20 new stocks. Others like to keep for 6 months and then rebalance. Pease note that a rebalancing period beyond one year is not advisable. Your rebalancing should be done at the end of 1 year maximum but not beyond that.

To extract the maximum benefit out of momentum investing, rebalancing period should not exceed one year.

Well, so that was all about the performance of a simple momentum portfolio and the rules for selecting such a portfolio.

Now, to the important point. If I was starting momentum investing today, what are the 20 stocks that I would keep on my watchlist. What are the 20 stocks that one can consider starting one's momentum journey with.

Here's the list that you might want to save and give some thoughts to.

It is a mix of sectors, there's IT, power, infrastructure, defense etc. Remember these are the stocks with strong momentum behind them. They have done well over the last one year and therefore, are strong candidates for your momentum portfolio.

Please note that these are just suggestions from our side and not recommendations. You need to do your own research or talk to your advisor before buying any of these stocks.

So, that was an introduction to a powerful form of investing i.e. momentum investing and also a list of 20 stocks that you can keep on your watchlist.

It is worth highlighting that I consider momentum investing to be a speculative form of investing as it does not involve figuring out the stock's intrinsic value, margin of safety etc.

There is very little fundamental analysis involved, and it is more about buying stocks that are trending and that have given very good returns over the last one year or so.

Hence, you should not make momentum investing a core part of your strategy and restrict it to may be only 10-15% of your overall allocation to equities.

This way, even if it fares poorly over a 2-3 year period, it does not cause a lot of damage to your overall corpus.

Happy Investing.

Warm regards,


Rahul Shah
Editor and Research Analyst, Profit Hunter
Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)