Fundamentally strong stocks are those that exhibit robust financial health, characterized by stable earnings, low debt levels, strong management, and competitive advantages. These stocks are typically seen as safer investments, especially during market downturns, such as the current situation in the Indian stock markets.
In the context of a downturn in the Indian stock markets, adding fundamentally strong stocks to one’s portfolio can provide a cushion against volatility. Such stocks are generally more resilient during economic challenges, offering stability and potential for capital appreciation over time.
Following are three fundamentally strong stocks to watch in the current market:
ITC Limited
With a market cap of Rs. 6.05 lakh crores, the shares of the largest cigarette manufacturer and seller in India surged nearly 0.5 percent to Rs. 484.3 on BSE, during the morning trading session of Monday.
The brokerage firm Nuvama Institutional Equities initiated a ‘buy’ rating on ITC and assigned a target price of Rs. 560 per share, representing a potential upside of nearly 16 percent from the current trading price of Rs. 483.9.
The company experienced significant growth in its revenue from operations, showing a year-on-year rise of around 16.7 percent from Rs. 17,774 crores in Q2 FY24 to Rs. 20,736 crores in Q2 FY25.
Similarly, the net profit grew marginally by nearly 1.8 percent YoY from Rs. 4,965 crores to Rs. 5,054 crores, over the same period.
In terms of key financial metrics, ITC has a Return on Equity (RoE) of 28.4 percent and a return on capital employed (RoCE) of 37.5 percent, with zero debt.
In addition, the company has maintained better margins over the years. In FY24, the company reported a net profit margin of 29.23 percent and an operating margin of 38.32 percent.
The stock has delivered positive returns of nearly 12.5 percent in the last one year, as well as around 3.6 percent returns year-to-date.
ITC Limited is primarily engaged in the consumer goods space, particularly cigarettes, and operates in four main business segments: Fast Moving Consumer Goods (FMCG); hotels; paperboards, paper, and packaging; and agri-business.
Hyundai Motor India Limited
With a market cap of Rs. 1.47 lakh crores, the shares of this recently listed stock and the third largest auto original equipment manufacturer in the world based on passenger vehicle sales surged nearly 0.3 percent to Rs. 1,848.45 on BSE, during the morning trading session of Monday.
The brokerage firm Motilal Oswal Financial Services initiated a ‘buy’ rating on Hyundai Motor and assigned a target price of Rs. 1,821 per share, representing a potential upside of nearly 28 percent from the current trading price of Rs. 1,843.85.
The company experienced significant growth in its revenue from operations, showing a year-on-year rise of around 4.3 percent from Rs. 16,624 crores in Q1 FY24 to Rs. 17,344 crores in Q1 FY25.
Similarly, the net profit grew by nearly 12 percent YoY from Rs. 1,329 crores to Rs. 1,490 crores, over the same period.
In terms of key financial metrics, Hyundai Motor has a Return on Equity (RoE) of 39.4 percent and a return on capital employed (RoCE) of 51.2 percent. Additionally, the company’s debt-to-equity ratio stands at 0.07.
In addition, the company has maintained better margins over the years. In FY24, the company reported a net profit margin of 8.67 percent and an operating margin of 12.02 percent.
Incorporated in 1996, Hyundai Motor India Limited, a part of the Hyundai Motor Group, is the second-largest player in the Indian passenger car industry and the second-largest exporter of passenger vehicles (PVs).
Tata Motors Limited
With a market cap of Rs. 3.22 lakh crores, the shares of a leading global automobile manufacturer surged nearly 1.5 percent to Rs. 877.5 on BSE, during the morning trading session of Monday.
The brokerage firm Sharekhan initiated a ‘buy’ rating on Tata Motors and assigned a target price of Rs. 1,319 per share, representing a potential upside of nearly 51 percent from the current trading price of Rs. 875.65.
The company experienced significant growth in its revenue from operations, showing a year-on-year marginal rise of around 5.7 percent from Rs. 1,02,236 crores in Q1 FY24 to Rs. 1,08,048 crores in Q1 FY25.
Similarly, the net profit grew by nearly 72.4 percent YoY from Rs. 3,301 crores to Rs. 5,692 crores, over the same period.
In terms of key financial metrics, Tata Motors has a Return on Equity (RoE) of 49.4 percent and a return on capital employed (RoCE) of 20.1 percent. Additionally, the company’s debt-to-equity ratio stands at 1.26.
In addition, the company has maintained better margins over the years. In FY24, the company reported a net profit margin of 7.1 percent and an operating margin of 8.72 percent.
The stock has delivered positive returns of nearly 40 percent in the last one year, as well as around 11 percent returns year-to-date.
Tata Motors Limited is engaged in the business of designing, manufacturing and sale of a wide range of automotive vehicles, along with manufacturing engines for industrial applications.
Written by Shivani Singh
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