Long-Term Investment Strategy: Five Quality Stocks with Strong Growth Potential
The Indian stock market benchmarks, the Sensex and the Nifty 50, concluded the trading session on Friday, February 6, with respectable gains. Over the weekly period, both primary indices experienced a notable increase of 1.5%. This upward movement was primarily fueled by a combination of factors, including a pro-growth Union Budget for 2026, the finalization of an India-US trade agreement, renewed buying activity from foreign institutional investors, and the Reserve Bank of India's optimistic revision of GDP forecasts alongside a stable inflation outlook.
Foreign Investors Return to Indian Markets
Following a prolonged period of seven consecutive months of selling, foreign institutional investors have reversed their stance and are now net buyers of Indian equities in the cash segment. Data indicates that in February alone, FIIs have purchased Indian stocks valued at approximately ₹2,645 crore in cash transactions. This shift marks a significant change in investor sentiment and liquidity flow into the domestic market.
Market Outlook and Strategic Recommendations
Despite the improving market conditions, experts caution that persistent geopolitical uncertainties and underwhelming corporate earnings continue to pose significant challenges for the market. Analysts anticipate that the domestic market will experience heightened volatility in the short term. Consequently, financial advisors strongly recommend adopting a strategy of acquiring high-quality stocks during market dips for long-term portfolio growth.
Nandish Shah, AVP of PCG Research and Advisory in the Fundamental Wealth Management division at Motilal Oswal Financial Services, has identified five specific stocks that demonstrate substantial long-term potential. According to Shah's analysis, these stocks offer upside potential ranging from 12% to 30%. Here is an in-depth look at each recommendation:
Varun Beverages (VBL)
Previous Close: ₹439.05 | Target Price: ₹570 | Upside Potential: 30%
Shah acknowledged that the calendar year 2025 presented considerable challenges for Varun Beverages, primarily due to weather-related disruptions affecting demand, despite significant capacity expansions. However, looking forward, Shah anticipates a robust recovery in VBL's earnings momentum. This expected improvement is supported by several key factors:
- Expansion and scaling in international markets, with a particular focus on South Africa.
- Operational launch and growth of the snacking business segment starting in 2026, bolstered by new facilities in Morocco and Zimbabwe.
- Continuous enhancement and diversification of the product portfolio.
Furthermore, VBL has successfully completed substantial capacity additions over the past two years, resulting in a 40-45% increase in production capability. These capacities remained underutilized in 2025 due to external disruptions. Shah expressed confidence that with normalized weather patterns and the enhanced capacity, VBL is well-positioned to achieve healthy volume growth in the coming years.
Bharat Electronics (BEL)
Previous Close: ₹429.65 | Target Price: ₹520 | Upside Potential: 21%
Bharat Electronics maintains a robust and visible pipeline of prospects, encompassing both immediate base orders and larger strategic defense programs. Key near-term opportunities that are expected to drive order inflows include:
- LCA Mk-1A orders valued at nearly ₹24 billion.
- Shatrughat electronic warfare systems orders approximating ₹30 billion.
- Next-generation corvette orders estimated between ₹20-30 billion in FY26, with an additional ₹100-120 billion anticipated by the first half of FY27.
- Several other large programs worth around ₹20 billion.
Shah highlighted that BEL anticipates a gradual expansion in export opportunities, facilitated by evolving defense cooperation between India and the European Union. This collaboration is expected to open new international markets and create avenues for joint development projects over time. The company has set an ambitious long-term target to increase export contributions to approximately 10% of total revenues, up from the current low single-digit percentage.
Computer Age Management Services (CAMS)
Previous Close: ₹722.40 | Target Price: ₹840 | Upside Potential: 16%
CAMS continues to assert its dominance in the mutual fund registrar and transfer agent segment, characterized by high return on equity and strong cash generation capabilities. Although near-term mutual fund revenue growth experienced moderation due to price adjustments, profitability has rebounded to record levels. This recovery is attributed to sustained market share, increased transaction intensity, and effective operating leverage.
Non-mutual fund revenue has demonstrated impressive growth, expanding at a compound annual growth rate of 26% over the FY21 to FY26 period. Estimates project that non-MF revenue will reach over ₹2.2 billion by FY26, contributing 14.5% to total revenue as of December 2025. Company management has provided guidance to double non-MF revenue within the next five years, targeting ₹4 billion by FY29.
Shah forecasts that CAMS will deliver compound annual growth rates of 11% in revenue, 11% in EBITDA, and 12% in profit after tax during the FY25 to FY28 period.
Syrma SGS Technology
Previous Close: ₹868.60 | Target Price: ₹1,000 | Upside Potential: 15%
Shah noted that Syrma SGS Technology maintained strong operational performance, with EBITDA nearly doubling year-on-year during the third quarter of FY26. EBITDA margins expanded by 350 basis points year-on-year, driven by a favorable business mix and operational efficiencies.
The company's order book showed consistent improvement, reaching ₹64 billion as of December 2025, reflecting a 21% increase year-on-year and a 10% increase quarter-on-quarter. Management has revised its guidance upward, projecting more than ₹5 billion in EBITDA for FY26, with revenue guidance of approximately ₹1.6 billion for the fourth quarter of FY26.
Additionally, the company has provided guidance for 30% growth in both revenue and EBITDA for FY27, with EBITDA margins expected to reach 10%. Shah believes the company's long-term growth trajectory will remain robust, supported by several strategic initiatives:
- Focus on low-volume, high-margin business segments.
- Increased export activities.
- Growing revenue contributions from industrial and automotive segments.
- Entry into bare PCB manufacturing through joint ventures.
- Inorganic expansion into new verticals such as defense and solar inverters.
UltraTech Cement
Previous Close: ₹12,722 | Target Price: ₹14,200 | Upside Potential: 12%
UltraTech Cement's management has expressed a positive outlook on demand, highlighting a multi-year infrastructure pipeline across all regions. Key growth drivers include projects in roads, metros, railways, ports, airports, and housing segments. The company expects to operate at over 90% capacity utilization during the fourth quarter of FY26 and anticipates improvement in pricing due to strong demand conditions.
The phase IV expansion plan is progressing according to schedule and will be entirely funded through internal accruals. Management expects to achieve a net debt-to-EBITDA ratio of less than one time by the end of FY26, compared to 1.1 times as of December 2025. Integration processes for Kesoram and ICEM are advancing smoothly, with rapid brand transition underway. Benefits from cost improvement capital expenditures are projected to materialize starting from the fourth quarter of FY27.
Disclaimer: This article is intended for educational purposes only. The views and investment recommendations expressed are those of the financial expert and do not represent the opinions of the publication. Investors are strongly advised to consult with certified financial advisors and conduct thorough due diligence before making any investment decisions, as market conditions are subject to rapid changes and individual circumstances may vary significantly.
