Top 5 Momentum Stocks to Watch Out for Multibagger Returns in 2025

Inflation has been a major theme over the past half-decade.

From staying below 2% in early 2019, it surged past 7% by mid-2022.

Currently, it's hovering just below 4%.

India Inflation Rate

This wild fluctuation has greatly influenced asset values and how investors think.

On one hand, those with stock market exposure continue to benefit as market indices keep climbing.

The BSE Sensexv is up 119% over the last 5 years. The BSE Midcap index has appreciated 248% and the BSE Smallcap index is up 333% during the same time period.

Investors simply had to invest in indexes and chill. Monetary and fiscal policy did the rest for them - inflation took off and asset prices shot up.

With the US Fed set to cut rates this week, there is a growing debate - will this trend continue for the foreseeable future or are investors over-confident and a market correction is just around the corner?

The way I see it, money is still flowing into the economy. And that money is about to get a lot cheaper in the coming months with more rate cuts.

If the uptrend continues, momentum stocks could possibly come into play.

The idea behind momentum investing is simple. Winners will continue to win... the best performing stocks keep going higher for a while before they finally reverse.

So, the average best performing stock doesn't come down right away. It keeps going up and remains the best performing stock for some more time.

Keeping that in mind, we've shortlisted the top 5 momentum stocks that could continue the trend in 2025.

By the way, we wrote a similar editorial six months ago when the trend was shifting. Mazagon Dock, Voltamp Transformers and Zomato were some of the top momentum picks highlighted... and they've shot up in a span of months... that's what momentum investing is all about!

#1 Godfrey Philips

First on this list is Godfrey Philips.

The company is an associate of the KK Modi group of companies and Philip Morris Global Brands Inc.

Godfrey Philips primarily manufactures cigarettes. The company has been in the cigarette business in India for over eight decades.

Its portfolio comprises established cigarette brands such as Four Square, Red & White, Stellar, Cavenders and it also undertakes manufacturing & distribution of Marlboro brand of cigarettes.

Godfrey Philips has also diversified into segments such as mouth fresheners, paan masala, zarda, and retail.

As part of the company's plans to focus on its core business, the board of Godfrey Phillips decided to exit the business of its retail division 24Seven in April 2024.

In 2024 so far, shares of the company have zoomed over 270% with most of the gains coming in the past two months.

A lot of factors aided this recent rally, including the company gaining market share for its leading brand Marlboro, expansion of its Marlboro Compact cigarettes at Rs 10 each, and the launch of a new cigarette which has garnered favourable consumer response.

During the June 2024 quarter, Godfrey's cigarette volumes grew by 26.2% YoY, much higher than its peers ITC and VST. ITC's volume grew by 2.5% while VST Industries saw volumes decline by 5.5%.

Coming to its financials, the cigarette company has had a steady run in the past 5 years where it more than doubled the net profit.

FY24 was its best year in terms of sales, operating profit and net profit, driven by healthy growth in cigarettes segment and sale of unmanufactured tobacco.

Financial Snapshot

Rs m, consolidated	FY20	FY21	FY22	FY23	FY24
Net Sales	28,766	25,253	26,876	35,625	44,196
Growth (%)	15%	-12%	6%	33%	24%
Operating Profit	6,985	6,600	7,474	9,716	11,064
OPM (%)	24%	26%	28%	27%	25%
Net Profit	3,849	3,765	4,381	6,905	8,830
Net Margin (%)	13%	15%	16%	19%	20%
ROE (%)	18.2	15.8	15.9	21.3	22.7
ROCE (%)	25.4	21.3	21.4	27.6	28.5
Dividend (Rs)	24.0	24.0	28.0	44.0	56.0
Debt to Equity (x)	0.0	0.0	0.0	0.0	0.0

Data Source: Ace Equity

According to reports, the company has made a lot of investment in its inventory as the cigarette consumption in India continues to rise.

The company's board is set to meet later this week on 20 September 2024 to consider and approve a bonus issue of shares in the ratio of 2:1.

A word of caution... there's an ongoing dispute among members of the K.K. Modi family. We don't want to get into detail about it but according to the management, this dispute has not impacted the business operations of Godfrey.

The company's debt free status, strong balance sheet, and established market position could help it grow in the medium term.

Godfrey Philips also pays hefty dividends to shareholders. In FY24, the company paid a record Rs 56 per share in dividend, topping FY23's dividend of Rs 44 per share.

To know more, check out Godfrey Philips financial factsheet.

#2 Marksans Pharma

Next on this list is Marksans Pharma.

The company was initially incorporated as a wholly owned subsidiary of Glenmark Pharma in 2001. Two years later in 2003, it was spun off into a separate entity.

Marksans Pharma is engaged in the research, manufacturing and marketing of generic pharma products.

The company has a diversified profile when it comes to geographies and products. Over 90% of its revenue comes from the regulated markets like US, Europe, Australia and Canada.

In 2024 so far, shares of the company have rallied over 80%.

Favourable industry outlook, new drug launches and robust quarterly performance could be the key factors that propelled Marksans Pharma's share price.

The generics and OTC segment in particular continue to show strong demand globally, providing sufficient headroom for growth for companies like Marksans, who have a diversified presence.

The company has also shown consistent revenue growth, driven by expanding its product portfolio, especially in regulated markets like the US, UK, and Australia.

Financial Snapshot

Rs m, consolidated	FY20	FY21	FY22	FY23	FY24
Net Sales	11,342	13,762	14,908	18,521	21,774
Growth (%)	13%	21%	8%	24%	18%
Operating Profit	1,926	3,463	3,007	3,986	5,090
OPM (%)	17%	25%	20%	22%	23%
Net Profit	1,170	2,359	1,846	2,663	3,137
Net Margin (%)	10%	17%	12%	14%	14%
ROE (%)	20.5	31.3	18.7	18.6	16.5
ROCE (%)	25.6	39.8	23.8	22.9	22.4
Dividend (Rs)	0.1	0.3	0.3	0.5	0.6
Debt to Equity (x)	0.0	0.0	0.0	0.0	0.0

Data Source: Ace Equity

For the quarter ended June 2024, Marksans Pharma reported an all-round performance with the drugmaker's net profit shooting up by 26% to Rs 891 million.

Even after the acquisition of Teva Pharma in 2023, Marksans Pharma remains debt free.

Going forward, the company's management anticipates better growth, aided by expectations of a stable demand situation and new product launches.

For more, check out Marksans Pharma financial factsheet.

#3 Shilchar Technologies

Next on the list is Shilchar Technologies.

The company manufactures electronics & telecom and power & distribution transformers.

It caters to a wide cross-section of industrial segments from utility to the renewable energy sector and individual retail customers across the globe.

It has been concentrating on catering to the needs of the renewable energy sector, including solar and wind energy in the local market.

The company has a commendable position, being one of the top companies in India supplying transformers for renewable energy.

In 2024 so far, shares of the company have rallied 119%.

As demand for transformers boomed, investors took note of this company and its efforts in the transformer market.

Owing to the surge in large-scale projects emerging across the globe in the renewable sector, Shilchar saw a significant increase in its order book position.

The company's exports also shot up 37% YoY to Rs 2 billion (bn) in FY24. It exports to countries like US, Canada, Middle East, and African nations including Kenya and Nigeria.

Shilchar has more than tripled its revenue in the past 5 years while its net profit has shot up more than 10x.

Financial Snapshot

Rs m, consolidated	FY20	FY21	FY22	FY23	FY24
Net Sales	713	1,178	1,802	2,802	3,969
Growth (%)	-40%	65%	53%	56%	42%
Operating Profit	60	119	228	612	1,261
OPM (%)	8%	10%	13%	22%	32%
Net Profit	15	55	140	431	919
Net Margin (%)	2%	5%	8%	15%	23%
ROE (%)	2.5	8.7	19.2	42.9	55.5
ROCE (%)	4.5	12.5	23.6	53.9	74.6
Dividend (Rs)	0.5	0.8	2.0	5.0	12.5
Debt to Equity (x)	0.2	0.1	0.2	0.0	0.0

Data Source: Ace Equity

While power and energy are Shilchar's key revenue sectors, the company is expanding its footprint in the steel as well as cement industry.

In the latest investor presentation, the company said that the new capacity utilisation will begin from the second half of this year. Its current utilisation is at 100% with a capacity of 4,000 MVA and the company is planning to expand capacity by 88% and bring it to 7,500 MVA.

It has an order pipeline of Rs 5.5 bn for FY25.

Looking ahead, the company's distribution transformer division has large orders on hand, and it will continue to receive orders throughout the year due to high demand in foreign countries.

To know more, check out Shilchar's financial factsheet.

#4 Dixon Technologies

Next on this list is Dixon Technologies.

Dixon is India's largest home-grown contract manufacturer, manufacturing LED TVs, lighting products, semi-automatic washing machines, mobile phones and now IT hardware.

It has largest capacity in various stock keeping units (SKUs) and the largest product portfolio ranging from 6 kgs to 14 kg appliances.

Apart from manufacturing electronics, it offers repair and refurbishment services for the same.

In 2024 so far, Dixon Technologies share price has rallied 114%.

One of the most significant factors driving the rally in Dixon has been its participation in India's Production Linked Incentive (PLI) scheme. The PLI scheme, launched in 2020, incentivizes domestic manufacturers to scale up and compete on a global stage.

For Dixon, this initiative has been a game-changer, especially in the mobile phone manufacturing sector. Before the PLI scheme, Dixon's share of revenue from mobile phone production was a modest 12% in FY20. By capitalising on the incentives provided by the scheme, the company's revenue from this segment skyrocketed to 40% in FY23 and 62% in FY24.

Big names like Samsung, Motorola, VU, Nokia and Xiaomi have flocked to Dixon for their manufacturing needs.

Coming to its financials, in FY24, the company's revenue and net profit grew 45% and 47% to Rs 177.1 bn and Rs 3.8 bn, respectively. The company achieved this with stable operating and net margins.

The company has been repaying debt over the past few years as its cash flow position has improved.

Financial Snapshot

Rs m, consolidated	FY20	FY21	FY22	FY23	FY24
Net Sales	44,001	64,482	106,971	121,920	176,909
Growth (%)	47%	47%	66%	14%	45%
Operating Profit	2,327	2,935	3,881	5,219	7,264
OPM (%)	5%	5%	4%	4%	4%
Net Profit	1,205	1,598	1,902	2,555	3,678
Net Margin (%)	3%	2%	2%	2%	2%
ROE (%)	26.4	25.3	22.2	22.6	25.5
ROCE (%)	34.2	32.8	25.9	28.0	34.7
Dividend (Rs)	0.8	1.0	2.0	3.0	5.0
Debt to Equity (x)	0.2	0.2	0.5	0.1	0.1

Data Source: Ace Equity

In the first quarter of FY25, Dixon has already generated Rs 65,800 m in revenue. Dixon's order book remains strong across all business segments.

The company has its eyes set on becoming a major player in smartphone manufacturing. It currently produces over 15 million smartphones and 38 million feature phones annually. The company is aiming to ramp up this figure significantly over the next few years.

Going forward, it is planning to invest Rs 6,000 million in capex to set up a new factory for washing machines.

For more details, see the Dixon's financial fact sheet.

#5 Trent

Last on this list is Trent.

Part of the Tata group, Trent is engaged in the business of retailing food, grocery, non-food, apparel, footwear, accessories, toys, and games through format and concept stores.

The company operates over 875 stores across 170 cities for various brands such as Westside, Zudio, Utsa, Misbu, and Star.

In 2024 so far, Trent share price has rallied almost 150%.

There are several factors that aided to this rally, but the most important one would be the expansion of its Zudio brand.

The company's newly launched Zudio outlets have been a resounding success. The stores cater to budget-conscious consumers. The sharp rise in footfalls in these stores have aided to the overall growth of Trent.

A record 203 new stores of Zudio were opened during FY24 while entering 46 new cities during the year.

Trent has also done a great job of growing the consolidated net profit from a loss of Rs 190 million in FY14 to a profit of a whopping Rs 15 bn in FY24. The topline has also grown by 6x during the same period.

The company has had negligible debt all these years. It also has a solid competitive advantage of deriving bulk of its revenues through its own private labels.

In the last five years, its revenue, operating profit, and net profit grew by 29.1%, 26.2%, and 69.2% respectively, on a CAGR basis.

Here's a table showing Trent's historical financials -

Financial Snapshot

Rs m, consolidated	FY20	FY21	FY22	FY23	FY24
Net Sales	34,860	25,930	44,980	82,420	123,751
Growth (%)	33%	-26%	73%	83%	50%
Operating Profit	7,060	3,856	7,692	13,743	22,600
OPM (%)	20%	15%	17%	17%	18%
Net Profit	1,229	-1,462	1,058	4,446	14,868
Net Margin (%)	4%	-6%	2%	5%	12%
ROE (%)	5.3	-7.7	1.5	15.9	44.4
ROCE (%)	17.7	2.1	15.9	32.3	59.8
Dividend (Rs)	1.0	0.6	1.7	2.2	3.2
Debt to Equity (x)	0.1	0.1	0.2	0.2	0.1

Data Source: Ace Equity

With the growing demand for apparel from its customers, Trent plans to launch several new labels under its portfolio to ensure wide variety in its stores.

It's launching Zudio in Dubai in September 2024, which will be the retailer's maiden attempt to enter the overseas market to cash in on the large Indian diaspora.

Looking ahead, Trent expects to generate 10% of its sales from its new shopping site, westside.com.

Currently, Westside operates 169 stores across 88 cities, offering a range of branded apparel, footwear, accessories, and home furnishings, primarily through its owned labels.

Previously, Tata Unistore, which manages the e-commerce platform Tata CLiQ, exclusively sold Westside branded products, including clothing, footwear, and home items.

Trent has recently taken a coveted spot in the bluechip Nifty50 index with reports also stating that it may soon enter BSE Sensex.

For more, check out Trent's financial factsheet.

Which Other Momentum Stocks Should You Track?

Apart from the above, here are some more names to keep on your watchlist -

Company	Current Price (Rs)	2024 (%)
NDR Auto	1,897	121%
Bajaj Auto	11,889	77%
Oracle Financial Services	12,435	186%
Bharti Airtel	1,663	64%
Lupin	2,284	74%
Samvardhana Motherson	194	83%
Mazagon Dock	4,209	83%
Voltamp Transformers	13,444	100%
Hindustan Aeronautics	4,464	58%
Nippon Life AMC	660	45%

Source: Equitymaster

The Trend is Your Friend

Many investors consider momentum investing strategy to be counterintuitive, but it's actually quite simple.

If there are stocks that are outperforming the market when the market is falling, then think about how strongly investors believe in them. They are buying these stocks even when they are selling other stocks.

That shows the potential of keeping a close watch on momentum stocks. They can deliver significant outperformance.

Just as value investors invest in value stocks when no one else is interested, momentum investors should start looking for momentum stocks right now when the momentum is just starting to catch up... this way you can find momentum stocks in their upcycle.

That's it for today, happy investing!

By the way, you can also check out the video version of this editorial on Equitymaster's YouTube channel.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...