Investing in the stock market is one of the most lucrative ways to grow your wealth over the long term. In India, the stock market has grown at an average rate of 15% per year over the past decade, making it an attractive destination for investors looking for long-term returns. In this blog, we'll discuss what a long-term investment is, why long-term investments are good, how long-term investments work, and how to pick the best stocks for long-term investment in India.
What is a long-term investment?
Long-term investment in stocks could be the period of more than 5/7 years (it could be different for each investor). Now, fundamentals and other aspects of the company like financials, management, and efficiency play a critical role when looking for the best shares to invest in India for long term.
The stocks that we are going to discuss are stocks that one can accumulate with a long-term investment horizon that will accrue significant compounding benefits in the future, so one can look to pass them on to their children as well. So. let's see the best stocks to invest in India for long term. But before we move ahead, let’s understand some basics of long-term investing.
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Why are long-term investments in stocks good?
Long-term investments in stocks are good for several reasons. Here are some of the key benefits:
Compounding: One of the biggest advantages of long-term investments in stocks is the power of compounding. Compounding is the process of reinvesting your returns to earn even more returns. Over a long period of time, this can significantly increase your wealth.
Lower risk: Investing in stocks for the long term can help lower your risk. Short-term investments are more volatile and subject to market fluctuations, which can lead to losses. By investing for the long term, you have more time to weather these ups and downs and potentially earn higher returns.
Higher returns: Historically, stocks have provided higher returns compared to other types of investments like bonds or real estate. By investing in stocks for the long term, you can potentially earn higher returns and build wealth more quickly.
Tax benefits: In many countries, long-term investments in stocks come with tax benefits. For example, in India, long-term capital gains on stocks are taxed at a lower rate compared to short-term capital gains.
How do long-term investments work?
Long-term investments work by allowing you to benefit from the long-term growth of your investments. This growth can be driven by a variety of factors, including the growth of the underlying company or industry, changes in market conditions, and changes in government policies. As long as you hold onto your investments over the long term, you can ride out short-term fluctuations and benefit from the long-term growth of your investments.
How do long-term investments help you become wealthy?
Long-term investments help you become wealthy by allowing you to benefit from the power of compounding. You can build up a lot of wealth over time if you reinvest your returns and keep your investments for a long time. This wealth can be used to achieve your financial goals, such as retirement or buying a home, and can help you achieve financial freedom.
How to choose stocks for long term investment in India
When picking the best shares to buy in India for long term, there are several factors you should consider that will help you know how to pick stocks for long term.
These include:
Quality of the company: When looking for the best long term stocks in India, look for companies that are well-established, have a strong competitive advantage, and are leaders in their industry.
Financial performance: Look for companies that have a strong financial track record, with consistent revenue and earnings growth.
Valuation: When choosing long term shares to invest in India, look for companies that are trading at a reasonable valuation, with a low price-to-earnings ratio and a high dividend yield.
Industry trends: Look for companies that are operating in industries that are expected to grow over the long term, such as technology, healthcare, and consumer goods.
Management quality: Look for companies that have a strong and experienced management team, with a proven track record of success.
Best stocks to invest in India for the long term investment in 2024
Gujarat Fluorochemicals Ltd: GFL is a prominent player in India's Fluoro-polymers, Fluoro-specialties, Chemicals, and Refrigerants industry, ranking among the top five global fluoropolymer producers. With a diversified product portfolio encompassing high-quality polymers like PTFE, PFA, PVDF, FKM, and PPA, GFL serves various industries including aerospace, telecom, automobile, wire and cable, and adhesives.
Currently boasting a production capacity of 18k TPA, the company aims to increase it to 21.6k TPA by FY25.GFL operates through three business verticals: Bulk Chemical, Fluorochemical, and Fluoropolymer, its polymer business contributes 56% of total revenue. The company strategically focuses on developing advanced polymers, particularly for the semiconductor, EV, and hydrocele sectors, ensuring better realization and high margins.
Positioned to gain market share in Europe, GFL capitalizes on non-fluorinated technology developments that reduce regulatory risks. Whereas, other legacy players are exiting the market due to regulatory challenges leading to additional gains in market share.
- Diversifying into emerging sectors such as EV batteries, Solar Panels, and Hydrogen Fuel Cells, GFL seizes substantial growth opportunities. The company's growth potential is strengthened by new capital expenditure, a high-value product mix, and its leading position in the export market. In summary, GFL is poised for significant expansion and success in the foreseeable future, supported by its global recognition and commitment to innovation in fluoropolymers and specialty chemicals.
- Rainbows Children’s Medicare Ltd: RCML is the largest pediatric hospital chain in the country, operating 16 hospitals across 6 cities with a total bed capacity of 1,715 beds. Utilizing a cost-effective hub and spoke business model, RCML achieves quicker breakeven with lower establishment costs for spoke hospitals.
- This strategic approach not only optimizes expenses but also expands the company's reach to capture higher patient volumes from both urban and nearby regions. With a bed expansion plan targeting 2,585 beds by FY27, RCML is set for substantial growth.
- RCML's current 50%+ occupancy rate and an ARPOB of 50,000 showcase its strong market presence. The company anticipates a 5% CAGR in ARPOB by FY25-26, attributing this growth to favourable payer dynamics, a specialized service mix, and a concentrated footprint in Tier 1 cities.
- The deliberate allocation of one-third of its beds to NICU and PICU enhances margins and revenue realization. Its innovative business model, strategic expansion plans, and focus on specialized pediatric services position it as a key player in the evolving landscape of pediatric healthcare, ensuring sustained growth and impact.
- Sula Vineyard Ltd: Sula Vineyards Limited, founded in 2003, is India's largest wine producer, dominating with a 52% market share. Its business verticals include wine production, import, distribution, and wine tourism.
- Brands include "Sula," "RASA," and "Dindori," categorized into Elite, Premium, Economy, and Popular segments. FY22 saw a shift, with Own Brands contributing 84%, and the company holding a 60% value market share in elite and premium categories. It Operates in 25 states in India and exports to over 20 countries globally.
- Sula owned 4 and 2 leased facilities in Maharashtra and Karnataka, with a winery capacity of 16.7 Mn liters. SULA Boasts the largest distribution network in India, with 13,000 retail touchpoints and over 23,000 points of sale. Maharashtra, Karnataka, New Delhi, and Goa contribute ~90% of revenues. Pioneering wine tourism in India, operating two vineyard resorts and tasting rooms. Added villas and rooms in H1FY24, with 180,000+ visitors and 96,000+ tastings.
- Strong D2C channel through wine tourism facilities, emphasizing premiumization. It Continuing emphasize wine tourism, increasing awareness, and penetrating Tier-1 and 2 cities in India. Sula Vineyards' commitment to quality and innovation solidifies its leadership in the Indian wine industry.
- Hindustan Unilever: HUL dominates the Fast-Moving Consumer Goods (FMCG) industry in India, with three key segments: Beauty and Personal Care (42% of revenues), Home Care (29%), and Foods and Refreshments (29%).
- In Beauty & Personal Care, HUL boasts a diverse portfolio with over 900 products across 14 consumer clusters, earning impressive ~29% margins. Key brands include Dove, LUX, and Ponds. Home Care comprises household and fabric care products, such as Vim and Surf Excel, targeting all economic segments.
- Pureit caters to water purifiers. In Foods & Refreshments, HUL offers a range of products from ketchup to ice creams, focusing on innovation and market penetration. Notable brands are Knorr, Lipton, and Kwality Walls. With a vast footprint, HUL's brands are available in 80 lakh+ stores, reaching 90% of Indian households. It dominates 90% of its markets, including skin care, tea, and ketchup. HUL adapts to modern trends with the 'Shikhar' app for retail outlets, witnessing a 2x growth in e-commerce sales.
- The company has 31 manufacturing facilities and embraces technology for channel transformation. Recent acquisitions include Indulekha in 2015 and Vwash in 2020. The major merger with GlaxoSmithKline Consumer Healthcare Ltd (GSK CH) in 2020, costing Rs. 40,200 crores, added popular brands like Horlicks and Boost to HUL's portfolio.
- Central Depository Services (India) Ltd.: CDSL, a leading Market Infrastructure Institution in India's capital market, plays a pivotal role in electronic securities transactions. Operating through three segments - Depository, Data Entry and Storage, and Repository - it holds the position of India's largest securities depository.
- In FY21, 78% of CDSL's revenue came from depository activities, showcasing its dominance. With a vast network of over 20,689 service centers across the nation, it achieved a milestone by surpassing 3 crore demat accounts.
- CDSL embraces modern technologies like blockchain, enhancing transparency in handling securities. Subsidiaries, such as CVL and CCRL, strengthen its market presence. With strategic investments of 709 crores in various instruments, CDSL aims to be fully digital, focusing on a unified demat account for all financial assets.
- Revenue streams include Annual Maintenance Charges, Transaction Charges, KYC Services, IPO and Corporate Actions. Collaborating with other MIIs, CDSL initiated India International Bullion Holding IFSC Limited, aligning with its goal of becoming a fully digital organization.
Concluding thoughts
In conclusion, investing in the stock market can be an excellent way to grow your wealth over the long term. By holding onto your investments over the long term and benefiting from the power of compounding, you can generate significant wealth and achieve your financial goals. When picking stocks for long-term investment in India, be sure to consider the quality of the company, financial performance, valuation, industry trends, and management quality. By following these guidelines, you can increase your chances of success and achieve financial freedom.
If you're also looking to invest in the Indian stock market for the short term in 2023, you need to be strategic and selective with your picks. By using our expert tips on how to choose the right shares, you can make informed decisions and potentially earn quick profits in a shorter timeframe. Here are the 5 best stocks to invest in India for short term in 2024.
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