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Wednesday, January 28, 2015

Blue Chip stocks - an introduction

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(LiveBombayStockExchange stock market basics series ) - Many of the newbies of stock market often want to understand answer to following question:

What are Blue Chips in stock markets?

Blue chips stocks in Stock markets is term taken from the game of poker. In poker blue colored chips are most valued of all the other chips. Hence by Analogy: In stock markets blue chips are represented by business corporations who are leaders of respective business segment. Generally Blue chips stocks have business turnover in thousand of crores and market capitalization is also in billions of dollars.

Blue chips often have famous products or services which are well known at national level or at international arena. These companies are matured corporations who often give dividends to its share-holders. Blue chip companies have well matured leadership, vision and lots of money. Blue chip companies are categorized under large-caps in stock markets. for eg BSE SENSEX index consists of 30 blue chip companies of India, these are well known in india and includes the likes of TCS, INFOSYS, BHARTI, RIL etc.

Investing in blue-chips is very important for a person maintaining a stock portfolio as these companies are surely source of stable growth. A person who is new to stock market and wants to maintain a good stock portfolio should have few blue chips included. This helps him as blue chips offer stable growth and returns, which is often in line with the index growth ie if BSE SENSEX moves from 30000 to 32000 pts then it's constituents would also increase in value proportionately and since in long term investments stock indices are bound to go higher, blue chips should always move towards north(some unexceptional behaviour might move blue chips otherside). Generally Blue chip stocks are more safer then lesser known companies of same domain(This may not be true sometimes though)

Hence now when you hear word 'Blue chip' on any business channel, you are sure to understand about them and what analysts say about them.

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