InvestorQ : What is meant by Blue Chip stocks and how should investors look at them?
ishika Banerjee made post

What is meant by Blue Chip stocks and how should investors look at them?

Answer
user profile image
2 years ago


As the name suggests, the blue chip stocks are those stocks that belong to reputed business groups or are backed by marquee institutions in India. These stocks have established track record of profitability, growth, management performance and corporate governance. Not all blue chips are outperformers, but retail and institutional investors believe that the risk of investing in these stocks is very low over the longer term.

Some of stocks belonging to reputed industrial groups like Tatas, Birlas, Bajaj, Reliance, and L&T are all considered to be blue chips. Similarly, businesses that are backed by reputed institutions like HDFC, SBI are also classified as blue chip stocks in the market. The normal strategy of most investors is to buy blue chips on every dip since the assumption is that such high quality stocks eventually tend to bounce back.