Top Stocks to Invest in the Dip

The recent decline in the market has worried investors. Have you ever seen your portfolio stocks drop more than 30% in a few days as a result of unfavourable news, a change in the law, or a downturn in the industry? These stocks are usually held by businesses that are growing quickly, fostering innovation, and setting themselves up for success in the future.

Even the most promising growth stocks, however, may see sharp drops due to market instability.  

Finding growing stocks that have seen a significant decline can be a wise investment strategy. This article will examine ten growth stocks that still exhibit encouraging future prospects despite a more than 30% decline in share prices. These businesses should be on your watchlist because they may currently be undervalued. Knowing these chances could help you make wise selections and possibly open up big growth in the years to come, regardless of your level of experience as an investor or your stage of portfolio development.

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1. Polycab India:

Polycab is India’s leading manufacturer of cables and wires and allied products such as uPVC conduits and lugs and glands. We have a range of cables and wires for practically every application. More recently Polycab has also launched a wide range of consumer electrical products like Fans, Switches, Switchgear, LED lights and Luminaries, Solar Inverters, and Pumps.

Polycab holds a 22–24% market share in the domestic organised wire and cable industry.  The wires and cables section accounts for 89% of the company's revenue, followed by fast-moving electrical items at 9% and other businesses at 2%. 90% of the company's income comes from the home market, with the remaining 10% coming from exports. Polycab now operates in more than 76 countries worldwide. Twenty percent go to Europe, while forty-six percent go to North America.

Positives: 

• The company is almost debt free.
• Polycab has delivered good profit growth of 28.1% CAGR over last 5 years
• The company has been maintaining a healthy dividend payout of 24.0%

Negatives:

• Stock is trading at 9.38 times its book value.
• Promoter holding has decreased over last 3 years: -5.10%

2. Tips Music

Founded in 1996, Tips Industries Limited is involved in the production and distribution of motion movies as well as the purchase and exploitation of music rights.

 All of the company's income comes from licence payments.  Digital platforms account for 75% of revenue, with YouTube accounting for 45–50% and other digital channels for the remaining 25–30%.

TV and public performances account for the remaining 25% of revenue.

73% of Tips Music income comes from overseas markets, where it distributes its goods to nations including South Africa, Israel, and Malaysia, while 27% comes from the home market.

Through its network of distributors, the company provides services to over 1,000 wholesalers nationwide, who in turn supply over 400,000 shops.

Positives:

• The company is almost debt free.
• The company has delivered good profit growth of 131% CAGR over the last 5 years.
• The company has a good return on equity (ROE) track record: 3 Years ROE 70.1%.
• The company has been maintaining a healthy dividend payout of 24.3%.

Negatives:

• Stock is trading at 42.7 times its book value.
• Promoter holding has decreased over last 3 years: -10.8%.

3. Central Depository Services Ltd

The sole listed depository in India, Central Depository Services (CDSL), has benefited greatly from the structural expansion of the capital markets. Only two depositories exist in India; the other being NSDL, which is not yet on the list. CDSL's dominance in the depository services industry is demonstrated by the growth of its market share for cumulative active demat accounts, which increased from 40% in FY14 to an astounding 73% in FY23. Regarding the financials, CDSL Ltd. stated that its revenues for 9MFY25 increased by 50.1%, while its profit after tax increased by 44.7% within the same time frame. EBITDA margins for 9MFY25 and 9MFY24 were 60% and 59.7%, respectively, maintaining their stability..

Positives:

• The company is almost debt free.
• The company has delivered good profit growth of 29.9% CAGR over the last 5 years.
• The company has a good return on equity (ROE) track record: 3 Years ROE 28.9%.
• The company's median sales growth is 18.5% over the last 10 years.

Negatives:

• Stock is trading at 17.5 times its book value.
• Promoter holding is low: 15.0%.
• Promoter holding has decreased over the last 3 years: -5.00%.

4. Zen Technologies

In 1996, Zen Technologies Limited was established.  The company creates, develops, and produces counter-drone and combat training systems for security and defence organisations.
 It actively contributes to the indigenisation of technology that benefit the Indian paramilitary, state police, and armed forces.
 Zen Technologies has operations in the USA, UAE, and India, with its headquarters being in Hyderabad, India. The company's product line includes yearly maintenance agreements, counter drone solutions, and training simulation equipment. With more than 95% of the tank simulator market, Zen Technologies is a market leader in the production of defence training systems..

Positives: 

The company is almost debt free.
The company is expected to give a good quarter.
The company has delivered good profit growth of 56.9% CAGR over the last 5 years.
The company's median sales growth is 27.6% over the last 10 years.

Negatives:

• Stock is trading at 8.65 times its book value.
• The company has high debtors of 153 days.
• Promoter holding has decreased over the last 3 years: -11.1%.

 5. Tata Motors Ltd

Tata Motors Group is a leading global automobile manufacturer. Part of the illustrious multi-national conglomerate, the Tata group, it offers a wide and diverse portfolio of cars, sports utility vehicles, trucks, buses and defence vehicles to the world. The company targets to spend ₹ 8,000 Cr on capex in FY25, with ₹6,000 Cr already spent as of 9M FY25. In Sept 2024, it inaugurated a new vehicle manufacturing facility in Tamil Nadu.

Positives: 

• The company has reduced debt.
• The company has delivered good profit growth of 93.1% CAGR over the last 5 years.

Negatives:

• Tax rate seems low.
• Promoter holding has decreased over last 3 years: -3.83%.

6. Indian Hotels Company Ltd (IHCL)

IHCL, a Tata Group enterprise, operates renowned hospitality brands like Taj, Vivanta, and Ginger. The company has embraced an asset-light strategy, focusing on management contracts over owned properties.​

Positives:

• Adoption of an asset-light model has led to superior EBITDA margins of 70–75%.
• Plans to add 874 Ginger rooms by FY27, enhancing growth prospects.
• Motilal Oswal projects a 26% adjusted PAT CAGR, with a target price of ₹950, indicating a 21% upside. ​

Negatives:

• The hospitality sector is sensitive to economic downturns and geopolitical events.
• High competition from both domestic and international hotel chains.​

7. Hindustan Petroleum Corporation Ltd (HPCL)

HPCL is a major player in India's oil and gas sector, involved in refining and marketing petroleum products.​

Positives:

• Strategic investments in refining capacity and infrastructure.
• Beneficiary of India's growing energy demand.

Negatives:

• Exposure to global crude oil price volatility.
• Regulatory risks related to fuel pricing and subsidies.​

8. IndusInd Bank Ltd

IndusInd Bank Limited was incorporated in 1994 as a commercial bank under the Banking Regulation Act, 1949. The Bank is publicly held and provides a wide range of banking products and financial services to corporate and retail clients besides undertaking treasury operations.

Positives:

• Stock is trading at 0.94 times its book value
• Delivered good profit growth of 22.1% CAGR over last 5 years
• Median sales growth is 20.0% of last 10 years
• Working capital requirements have reduced from 62.6 days to 40.4 days

Negatives:

• Low interest coverage ratio.
• Promoter holding is low: 15.7%
• Low return on equity of 13.5% over the last 3 years.

9. Infosys Ltd

Infosys is a global leader in IT services and consulting, offering solutions in digital technology, cloud computing, and more.​

Positives:

• Strong client base across various industries.
• Consistent financial performance with robust margins.
• Recommended as a top trading idea for short-term gains. ​

Negatives:

• The IT sector faces challenges due to potential U.S. recession fears.
• Currency fluctuations can impact profitability.​

10. Canara Bank

Canara Bank is one of India's largest public sector banks, offering a wide range of banking and financial services.​

Positives:

Strong branch network and customer base.
Beneficiary of India's economic growth and increasing credit demand.
Experts recommend buying with targets up to ₹100. ​

Negatives:

Public sector banks often face challenges with non-performing assets (NPAs).
Subject to government policies and regulatory changes.​

Conclusion

Stock price drop of over 30% can be worrisome, but it can also offer astute investors opportunities. Despite major market declines, the ten growth firms discussed in this article—Tata Motors Ltd, Polycab India, Tips Music, Central Depository Services, and Zen Technologies—retain solid fundamentals and room to develop. Those who are prepared to endure the volatility may find that these companies provide long-term value, regardless of whether the volatility is brought on by heightened competition, transient market swings, or modifications in industry dynamics. Navigating the stock market's unpredictability requires, as always, doing extensive research and keeping a well-diversified portfolio. These businesses might rebound and generate strong profits in the future with patience and thorough observation, which would make them deserving of being on your watchlist.