Best Stocks to Invest for Long Term in 2023 | 5paisa (2024)

Long term investing is a popular strategy used by smart retail investors to make their money grow. Benjamin Graham, known as the father of value investing, said that intelligent investors don't try to time the market. Instead, they focus on the 'time in the market' by choosing investments that suit them best and avoiding making decisions based on rumours. When searching for the best stocks to buy in India for the long term, it's essential to consider fundamentals and qualitative aspects like the quality of management and efficiency. Long term investing usually means holding investments for more than 5 years.

In this blog, you'll find a list of the best Long Term Investment Stocks for 2023.

Before choosing the best long-term stocks to buy in India for 2023, consider these important factors:

I. Market Capitalization: This refers to the total value of the company in the stock market. Look for companies with a market cap of over ₹ 10,000 crores, as larger companies often have more stability and lower risk levels, providing more reliable returns.
II. Profit Growth: Check the company's profit growth over the past three years. A growth rate of more than 10% is a positive sign, indicating that the company is performing well and generating higher earnings.
III. Net Profit: Pay attention to the net profit of the company, which reflects the actual earnings after accounting for all expenses, including taxes and interest on debt. A healthy net profit indicates a financially sound business.

1. Reliance Industries

Key Highlights:

I. Revenue Growth: RIL's revenue showed positive growth in Q4FY23, increasing by 2.1% YoY to ₹ 216,376 crore. This growth was driven by improved performance in the O2C segment, benefiting from the recovery in oil demand, and the strong presence in the retail market.
II. Profit After Tax (PAT) Increase: The company's profit after tax witnessed significant growth of 19.1% YoY, reaching ₹ 19,299 crore. This robust profit growth indicates RIL's ability to effectively manage its operations across various segments.
III. Consumer Business Driving Growth: RIL's consumer business remained a key driver for growth, contributing to an expansion in EBITDA margin by 300 basis points YoY to 17.8%. This positive trend indicates the company's success in attracting and retaining customers in its retail and digital segments.

Key Risks:

I. Rising Debt: RIL's net debt increased significantly from ₹ 34,815 crore in March 2022 to ₹ 110,218 crore in March 2023, primarily due to working capital changes. Managing debt levels will be crucial for the company to maintain financial stability and avoid excessive financial burdens.
II. External Factors Impact: Reliance Industries is heavily dependent on global oil demand, and fluctuations in energy prices can affect its performance. Geopolitical events and economic uncertainties may pose risks to its petroleum refining and petrochemical business segments.
III. Competitive Landscape: The markets in which RIL operates are highly competitive, and the company faces competition from both domestic and international players. Any inability to effectively compete and adapt to changing market dynamics could impact its growth prospects.

Financial Performance:

I. Segment-wise Revenue Growth: RIL witnessed substantial revenue growth in key segments during FY23. The O2C segment, with a 66% share in revenue, grew by 18.7% YoY, driven by strong oil demand and favourable fuel cracks. The retail business also recorded impressive growth of 30.4% YoY, supported by increased footfalls and store expansions.
II. Digital Segment Performance: RIL's digital segment showed steady growth, with revenue reaching ₹ 119,785 crore in FY23, growing by 19.6% YoY. The increase in subscribers to 439 million and the accelerated launch of 5G contributed to the segment's success.
III. Oil and Gas Segment: The oil and gas segment revenue benefited from higher energy prices, surging 120% YoY to ₹16,508 crore. This performance reflects the influence of external factors like energy price movements.

Outlook:

I. Positive Global Oil Demand: With the reopening of China, global oil demand is expected to rise in the second half of FY24, which could improve RIL's petchem margins and positively impact its O2C segment.
II. Retail Expansion and Diversification: RIL aims to aggressively expand its retail segment, focusing on increasing footfalls and exploring new opportunities in fast-moving consumer goods and beauty businesses. This strategic move could enhance revenue streams and market share.
III.Telecom Business Growth: RIL's telecom business is expected to continue adding subscribers and expanding its 5G network, which may contribute to revenue growth and market leadership in the digital segment.

Key Ratios:

Reliance Industries Share Price

2. Tata Consultancy Services (TCS)

Key Highlights:

I. Revenue Growth: TCS reported a consolidated revenue growth of 12.6% YoY, reaching ₹ 59,381 crore. Strong performance in the life sciences and healthcare, and manufacturing verticals contributed to this growth, although revenue growth would have been higher without deferments in non-critical projects.
II. Strong Order Book: TCS boasted a robust order book of US$10.2 billion with a book-to-bill ratio of 1.4. This indicates a healthy pipeline of future business and bodes well for the company's long-term growth prospects.
III. Operating Performance: The operating profit grew by 12.9% YoY to ₹ 13,755 crore, and the operating margin improved to 23.2%, up 10 basis points YoY. Profit after tax (PAT) increased by 16.8% YoY to ₹ 11,120 crore, with a PAT margin rise of 70 basis points YoY, supported by higher other income.

Key Risks:

I. Subdued Revenue Growth: TCS experienced softening in revenue growth during Q1FY24 due to growing caution among clients amid uncertain macro-economic conditions. Clients reprioritizing deals with maximum ROI and delaying discretionary and non-critical projects may continue to impact revenue growth in the near term.
II. Global Economic Conditions: TCS's performance heavily relies on global economic conditions, and any downturn or geopolitical disruptions in major markets can affect its revenue streams and profitability.
III. Competitive Environment: The IT services industry is highly competitive, and TCS faces intense competition from both domestic and international players Failure to retain existing clients and win new contracts could impact the company's growth prospects.

Financial Performance:

I. Vertical-wise Growth: TCS witnessed growth in key verticals, with life sciences and healthcare growing at 10.1% YoY on cc basis and manufacturing at 9.4% YoY on cc basis. However, BFSI and retail segments saw muted growth at 3.0% and 5.3% YoY on cc terms, respectively.
II. Strong Order Book: TCS's total contract value (TCV) bookings stood at US$10.2 billion, growing by 24.4% YoY. Key deal wins include strategic partner’s hips with healthcare providers, automotive and technology companies.
III. Operational Efficiency: The company's operating profit and margin demonstrated sound financial management, indicating effective cost optimization strategies.

Outlook:

I. Long-term Growth Potential: Despite challenges in the near term, TCS has a strong order book and robust execution capabilities, which are likely to support its long-term growth prospects.
II. Digitalization and AI Opportunities: TCS's focus on digitalization and generative AI presents opportunities for productivity enhancement and customer interaction, which could drive future revenue growth.
III. Strong Client Base: TCS's addition of high-value clients in various bands reflects its ability to attract and retain clients, which will be crucial for future revenue expansion.

Key Ratios:

Tata Consultancy Services Share Price

3. Infosys

Key Highlights:

I. Revenue Growth: Infosys reported a 10.05% YoY increase in consolidated revenue, reaching ₹ 37,933 crore in Q1FY24. The growth was driven by strong performance in various segments, including financial services, manufacturing, and energy utilities.
II. Operating Margin Resilience: Despite a decline in operating profit margin from 24.03% to 23.89%, Infosys demonstrated operational resilience with a 0.73% rise in operating profit to ₹ 9,064 crore. The company's continued focus on cost optimization contributed to maintaining stable margins.
III. Strong Order Book: Infosys exhibited a robust order book with a total contract value (TCV) of US$10.2 billion, indicating a healthy pipeline of future business opportunities.

Key Risks:

I. Subdued Revenue Growth Guidance: The guidance for FY24 projects a reduced revenue growth rate of 1-3.5% in constant currency. The uncertain macro-economic conditions and clients' cautious approach in the wake of the pandemic could impact revenue expansion.
II. Margin Improvement Challenges: Despite operational discipline and cost optimization efforts, Infosys may face challenges in achieving margin improvement targets in an ever-evolving competitive IT services landscape.
III. Global Economic Conditions: The company's performance heavily relies on global economic conditions and geopolitical factors, and any downturn or disruptions in major markets could impact its revenue and profitability.

Financial Performance:

I. Segment-wise Sales Growth: Infosys witnessed sales growth across various segments in Q1FY24, with financial services, manufacturing, and retail performing well. However, telecom segment sales declined slightly.
II. Rise in Net Profit: The company's net profit attributable to owners decreased by 2.99% to ₹ 5,945 crore. Though the profit showed a slight decline, Infosys maintained robust free cash conversion at 96.6% of net profits and improved return on equity (ROE) to 32.8%.
III. Debt and Investment Changes: Infosys's loan funds increased to ₹ 8,483 crore, while investments declined to ₹ 17,527 crore. These financial shifts could impact the company's overall financial strategy.

Outlook:

I. AI Capabilities: Infosys's generative AI capabilities with 80 active client projects, including Topaz, are expected to enhance its service portfolio and provide transformative solutions to clients, potentially driving future growth.
II. Margin Improvement Program: The company's comprehensive margin improvement program aims to optimize costs and enhance productivity in the short, medium, and long term. Its effective execution will play a critical role in achieving desired profitability levels.
III. Capital Allocation Policy: Infosys's strong capital allocation policy, with higher pay-outs to investors, reflects the management's commitment to enhancing shareholder value. This focus on capital allocation could positively impact investors' confidence in the company.

Key Ratios:

Infosys Share Price

Conclusion

To summarize, RIL shows positive revenue growth and benefits from a strong retail presence, making it an attractive long-term investment. TCS demonstrates robust revenue growth and a healthy order book, positioning it well for long-term growth in digitalization and AI. Infosys records impressive revenue growth and maintains operational resilience, but investors should be cautious of subdued revenue growth guidance and margin improvement challenges. These are the Best Stocks to Buy in India for Long Term.