Forgotten Blue-Chips & Market Leaders: The Next Big Winners, Says Nippon India’s Sailesh Raj Bhan

Nippon India’s CIO, Sailesh Raj Bhan, believes that future market leaders will be different from past winners, with sectors like power, capital goods, and cement expected to see 15-20% earnings growth. He advises investors with a three-year horizon to accumulate undervalued stocks. Within momentum-driven sectors, he recommends sticking to industry leaders while avoiding weaker players. Some small-cap industrial and power companies, despite their classification, are financially strong.

Forgotten blue-chip stocks in insurance, cement, and consumer sectors could see a re-rating as their valuations have remained low for years. Many consumer stocks, once overpriced, are now available at more reasonable valuations, making them attractive long-term bets due to strong management and stable earnings. In the defence sector, Bhan urges caution, warning against smaller, low-margin companies that face cost and time overruns. Instead, he suggests focusing on established defence leaders for steady returns.

Smaller defence firms risk significant devaluation if they fail to meet earnings expectations. Overall, Bhan’s strategy emphasizes investing in fundamentally strong, undervalued businesses rather than chasing short-term trends.

Forgotten Blue-Chips & Market Leaders: The Next Big Winners, Says Nippon India’s Sailesh Raj Bhan

Sailesh Raj Bhan, Chief Investment Officer at Nippon India, shares insights on where investors can find promising opportunities in the stock market in the years ahead. He highlights that the sectors likely to drive future growth may not be the same ones that led previous rallies. Instead of following past trends, he advises focusing on industries such as power, capital goods, and cement, along with companies that thrive on large projects. These areas, he explains, are set to benefit from India’s growing infrastructure needs and rising demand, potentially delivering steady annual earnings growth of 15-20%.

Investing with a Long-Term Vision

Bhan recommends a patient approach for those willing to hold investments for at least three years. He views the current market as a favorable entry point, with many solid companies in high-potential sectors trading at reasonable prices. Waiting for further price drops, he cautions, could mean missing out on future gains, as consistent earnings growth might push stock prices higher over time. The key, he stresses, is discipline—avoiding impulsive decisions based on short-term market fluctuations and staying committed to a long-term strategy.

Playing It Safe with Market Leaders

While some stocks have surged and then corrected, Bhan advises against chasing these volatile options. Instead, he suggests sticking to industry leaders—established companies with strong financials, proven track records, and dominant market positions. Even among smaller firms (often classified as small caps), he identifies industrial and power-sector companies that function like stable, cash-generating businesses. These firms may not attract much media attention, but their reliable operations and manageable debt levels could offer steady annual returns of around 15%.

Unearthing Hidden Opportunities

Beyond industrials, Bhan sees potential in overlooked blue-chip stocks in sectors like insurance, cement, and consumer goods. Many of these companies have been undervalued for years due to a lack of investor interest. However, he believes even a modest uptick in their earnings could trigger a strong rebound in their stock prices. Historically, sustained earnings growth over a few years has driven stock re-ratings. Cement companies, for example, stand to gain from infrastructure expansion, while insurance firms could grow as financial literacy improves across India.

Consumer Stocks: A Shift in Perspective

Consumer stocks, once trading at steep valuations of 60-70 times earnings, have become more reasonably priced, with some now trading at about 30 times their projected FY27 earnings. While they are not exactly cheap, Bhan sees them as viable long-term bets due to their strong brands, experienced leadership, and consistent profitability. Companies in fast-moving consumer goods (FMCG), for instance, benefit from loyal customers and stable cash flows, making them resilient even during economic downturns.

Navigating the Defense Sector Wisely

The defense sector has attracted significant interest, particularly among smaller players, but Bhan urges caution. Many of these companies operate as subcontractors with thin profit margins and are vulnerable to project delays and budget overruns. If they fail to meet earnings expectations, their stock values could drop sharply. Instead, he recommends focusing on large, well-established defense companies with government contracts, advanced technology, and strong financials. These industry leaders are better positioned to manage risks and benefit from India’s ongoing defense modernization.

Prioritizing Stability Over Trends

At the core of Bhan’s strategy is investing in undervalued companies with strong fundamentals—consistent earnings growth, low debt, and capable management. He avoids sectors driven by temporary hype, even if they seem exciting. For example, while renewable energy and electric vehicles may dominate headlines, he prefers businesses with clear, sustainable growth paths. Cement companies, though not glamorous, play a critical role in infrastructure and housing, ensuring steady demand and long-term profitability.

Final Thoughts: Building Wealth Gradually

Bhan’s approach emphasizes patience, careful stock selection, and a focus on durable businesses. By targeting sectors aligned with India’s infrastructure expansion, industrial growth, and financial inclusion, he aims to identify companies that can generate wealth over time. His advice to investors is simple: ignore short-term market noise, prioritize firms with strong earnings potential, and allow the power of compounding to work in the long run. In a world chasing quick gains, Bhan’s strategy underscores the lasting value of steady, long-term investing in businesses built to endure.