Fastest Growing Stocks in India (2022): How to select the best ones?

Top growth stocks
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Best Growth Stocks to Invest

Investors use various strategies to maximize their profits in the stock market. One such strategy is to buy stocks that are expected to rise or simply the growth stocks India. These stocks are offered by companies that have higher chances of growth and expansion at a rate that is faster than the average growth rate. If you're also planning to invest in top growth stocks in India, then this article is for you. In this article, you will learn about the fastest growing stocks in India along with a helpful guide to selecting the right stocks for your portfolio. 

Summary in Brief 

  • What Are Growth Stocks? 
  • Characteristics of Growth Stocks
  • List of Top Growth Stocks India 
  • How to Select the Best Growth Stocks in India 
  • Frequently Asked Questions 

What Are Growth Stocks? 

Growth stocks are the stocks of companies or firms that are expected to grow their revenues and profits at a much faster rate than the average companies in the market or the respective industry. 

Growth stocks are among the hottest choices of investors mainly because they are likely to grow their wealth in a short span of time and help them fulfil their financial goals. The fast growing companies in general, have solid leadership teams that are focused on innovation and lucrative market opportunities. Such companies often stay on the top of popular trends like fintech and eCommerce. 

One good example of this type of company is Amazon, which has been a market leader since the time it started selling books on its online platform in 1995. Other examples include Square which introduced digital payment to small businesses and Alphabet which took digital advertising to another level. 

Characteristics of Growth Stocks

To select the right growth stocks in India, it is important to understand their features and characteristics. Having said that, below are the key features of high growth stocks India:

1. Higher Growth 

As the name suggests, growth stocks offer significantly higher growth as compared to the other types of stocks. This means that these stocks grow much faster than the other stocks available in the market. 

2. NIL or Low Dividends 

One important thing to note about growth stocks is, they don't usually pay dividends and even if they do, the amount is very low. This is mainly because these companies are growing at a very fast rate, and hence they prefer reinvesting their earnings back to speed up their revenue generation and expand their business. 

3. Have Competitive Advantage 

Growth stocks are able to have a higher growth rate because they have some level of competitive advantage over others in the same sub-sector or industry. This competitive edge provides them with a strong USP (Unique Selling Point), which allows them to sell and grow better than the competitors. 

4. Ideal for Long-term 

Because growth stocks don't pay dividends or pay negligible amounts, investing with short term goals doesn't benefit from them. However, the scenario is completely different for long-term investors. They can generate attractive revenues through higher capital gains because the growth companies experience manifold growth in the long term. 

5. Risk factor

Stock market investments always involve some degree of risk. Growth stocks are not an exception in this case. While these stocks look very attractive and can help you generate higher profits, the level of risk associated with them in the short term contributes to higher risk. This is the reason why it is advisable to invest in growth stocks for the long term. 

6. Have Loyal Customer Base 

Because growth companies have a great competitive edge over their competitors within the same industry, they have a loyal and satisfied customer base. The USP these companies have ensures a constant growth of the customer base which in turn contributes to their higher growth rate. 

List of Top Growth Stocks India 

Stocks Industry Market Capitalization (Cr.) P/E Ratio 
Adani Greens Utilities 2,84,000.27

563.53


 

AU Small Finance BankConsumer Finance 38,47933.41
Polycab India Power cable manufacturing 32,69235.34
KEI Industries Power cable manufacturing 10,332.39

27.48


 

Avanti Feeds Consumer Staples 5,719.5925.81
Bajaj Finance Consumer Finance 3,29,757.6446.92
Britannia Consumer Staples 82,145.7253.77
Adani Gas ATGLUtilities 2,49,744.87494.88
JSW SteelIron and Steel 1,32,630.786.42
ADANITRANSUtilities / Power Infrastructure 2,36,746.59196.53

Disclaimer: The securities quoted are exemplary and not recommendatory. Past performance is not indicative of future returns

How to Select the Best Growth Stocks in India 

Below are the characteristics you should consider at the time of selecting the right growth stocks for your investment:

1. Higher Profit Margins 

The best growth stocks are from companies with higher profit margins that are also increasing at a constant rate. Note that the negative profit margins can turn positive and generate dramatic returns when you hold the share for a long time. This can help you build a stunning portfolio. Moreover, companies that are growing at a faster rate and earning profit also keep increasing their profit margins. Such companies are generally more suitable for beginners as they offer low-risk as compared to others. 

2. Solid Sales Growth 

Companies that are growth-oriented increase their revenues significantly over time. The reason behind this is that the only way to maximize profits is to grow the revenues as well. 

3. Projected Earnings of Company 

When an analyst projects that a company's earnings are likely to increase, it is a positive indicator. Although the projections of analysts aren't always accurate, they are great for gauging market trends and performance. 

4. Higher RoE (Return on Equity) 

Return on Equity or ROE is equivalent to the net income of a company in terms of its shareholders' equity percentage. A company with higher RoE as compared to its competitors uses the capital in a more effective way to generate and grow profits. 

5. Manageable Debt 

Because it is possible to have a higher ROE through higher amounts of debt, it is very crucial to evaluate the liabilities of the shortlisted company. Make sure that the ROE of a company is not influenced by the debt it holds. Further, compare the debts of the given company with its competitors. Also, the past performance of the company should show a manageable debt trend. That's all. 

Key Takeaway 

Growth stocks are great investment options for investors who are willing to take moderate risk and want to enjoy higher returns on their investment over the long term. We have discussed the best growth stocks in India along with the guide to selecting the best for your portfolio. We hope this information helps! 

Important things to remember:

1. Do Not Blindly Follow Hot Tips

No matter how credible the source is, never follow a stock marketing tip blindly without conducting thorough research personally. Always select the stocks after doing proper research and analysis on the performance as well as the companies. While some tips can work out to give you huge benefits, the wrong ones can push you down under the risk pretty quickly. 

2. Eliminate Loser Stocks from Portfolio 

There is absolutely no guarantee that a stock will rise after a great fall. Know that it is extremely important to be practical about what is possible and what's impossible in the stock market. So, upon realizing that a stock is performing poorly in your portfolio, accept your mistake and sell it immediately to prevent further losses. 

3. Don't Exceed Your Investment Budget Abruptly 

While it's true that long-term investments are way better than other forms of investment, you shouldn't exceed your investment budget in a haste. Instead, decide on a fixed amount and invest it across various good stocks. Rather than investing in only one stock, divide your budget evenly across multiple good-performing stocks and shares. 

  • Which sector will grow in next 10 years?

  • Are growth stocks good for beginners?

  • Which is the best high growth stock in India?

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