Five blue-chip stocks that could bounce back in 2026
These blue-chip companies have corrected over the past year but show improving fundamentals and clear earnings recovery potential in 2026.
Market cycles often have a way of testing patience. Companies that once seemed unstoppable can suddenly lose their shine, weighed down by softer earnings, rising costs or shifting investor focus. Yet, as 2026 approaches, some of these large, dependable names are beginning to show early signs of recovery.
Across sectors, leaders that spent the past year consolidating are now benefiting from cost control, balance sheet strength and improving demand trends. The reset in valuations has also made a few of them look more reasonable after years of premium pricing.
For investors seeking stability with a touch of comeback potential, these blue-chip names could be worth adding to your watchlist. Their fundamentals remain solid, and the operating levers for recovery are already in motion.
After a year of mixed performance, the setup appears more balanced—earnings are catching up to expectations, and the optimism that once faded is slowly returning. Two thousand and twenty-six may well turn out to be the year when old favourites stage their quiet comeback.
Please note, this editorial is not a stock recommendation in any form. It merely focuses on companies that are consolidating and that could make a comeback in terms of growth.
Varun Beverages Ltd
Varun Beverages, a key PepsiCo franchisee and one of India’s leading beverage players, has seen its stock decline nearly 21% in the past year. The company’s domestic operations were hit by erratic rainfall and a muted summer season, leading to a softer quarter. Yet, the long-term story for this beverage major remains intact as it continues to expand its portfolio and global footprint.
In the September quarter, consolidated sales grew 1.9% year-on-year, driven by a rise in international volumes, while India volumes were flat due to prolonged monsoon conditions. Gross margins improved to 56.7%, supported by a higher mix of packaged water and operational efficiencies. The company’s value-added dairy segment grew in triple digits, and its hydration portfolio, led by Nimbooz, rose over 50% during the quarter.
Earnings before interest, taxes, depreciation, and amortization (Ebitda) margins, however, contracted slightly to 23.4% as in-house backward integration shifted some raw material costs to manufacturing and employee expenses.
Looking ahead, Varun Beverages plans to diversify into alcoholic beverages through an exclusive distribution agreement with Carlsberg in select African markets. It has also incorporated a subsidiary in Kenya to expand beverage manufacturing and is testing a new energy drink brand, Adrenaline Rush, in India. With new plants commissioned in India, DRC and South Africa, the company remains over-prepared on capacity for calendar year 2026 growth.
Moreover, with the weather normalizing and festive-season demand improving, near-term trends already look stronger than the previous quarter.
The stock trades at around 47 times earnings, close to its five-year median valuation. After a weather-led miss in 2025, improved demand visibility, expanding categories, and international diversification could drive a stronger rebound in performance in 2026.
Avenue Supermarts Ltd
Avenue Supermarts, the operator of DMart stores, has seen its stock correct nearly 18% in the past year.
A combination of erratic monsoons, softer discretionary demand and rising employee costs weighed on profitability. Despite the short-term drag, management remains upbeat on the company’s medium-term growth, anchored by an accelerated store rollout, private-label expansion and an improving e-commerce model.
In 2024-25, consolidated sales grew 16.7% year-on-year, while Ebitda margin moderated to 7.9% from 8.3%. The decline was led by a sharp rise in employee costs as the company built capacity for faster store expansion, higher depreciation on new stores and mild price deflation in private-label categories.
Gross margins stayed firm on efficient sourcing and a better staples mix. Same-store sales rose 8.4%, while DMart Ready grew 21%, driven by strong metro traction.
Management expects faster network growth with 10-15% annual store expansion, led by North India. It is building capacity for quicker rollout, while DMart Ready focuses on large metros and a deeper presence in key cities.
Capital work-in-progress has risen as the retailer front-loads investments, funded largely through internal accruals.
At around 97 times earnings, the stock trades at a premium to its five-year median of 116. With store acceleration, private-label growth and improving e-commerce unit economics, Avenue Supermarts appears positioned for a stronger 2025-26 rebound.
Power Finance Corp. Ltd
Power Finance Corp. (PFC) is India’s largest power sector financier. The company has seen its stock slip nearly 12% over the past year as investors turned cautious on PSU financials after a strong multi-year rally. However, the company’s steady loan growth, strong asset quality and disciplined capital allocation suggest the correction could be overdone.
In Q1FY26, loan growth of 16% year-on-year came in ahead of management’s full-year guidance of 10-11%, led by a jump in disbursements and lower repayment rates.
Net interest spread improved to 3.68%, aided by better yields and lower borrowing costs. Asset quality strengthened further, with net NPA down at 0.31%. Provision reversals for Tamil Nadu discoms and the resolution of stressed assets such as TRN Energy and Shiga Energy also aided earnings. The company’s renewable loan book rose 36% year-on-year, reflecting strong traction in the clean energy segment.
Looking ahead, PFC guided for loan growth of 10-11% in FY26, maintaining its focus on power distribution and renewable sectors.
Management reiterated its spread guidance at about 2.5% and expects margins to stay firm. With ₹390 bn sanctioned under the RDSS scheme, PFC sees stronger disbursements from renewables, transmission and energy storage, alongside funding opportunities in thermal, hybrid solar-wind and nuclear projects.
Capital adequacy stands at 22.4%, borrowings are diversified with 95% of forex exposure hedged, and the stock trades near 1.1 times book, above its historical average.
With steady growth and sector tailwinds, PFC’s long lending runway supports the case for a re-rating in 2026.
Sun Pharmaceutical Industries Ltd
Sun Pharmaceutical Industries, India’s largest drugmaker by market value, has seen its stock soften about 10% over the past year.
The weakness stems largely from pricing pressure in the US generics business and higher R&D and marketing spends linked to its speciality launches. Yet, the company’s diversified global base and expanding speciality portfolio make it well-positioned for steady growth in FY26.
In Q2FY26, revenue grew around 9% year-on-year, led by steady growth in India and emerging markets, partly offset by a decline in the US generics business. Ebitda margin declined to 28.4% from 28.7% last year due to higher material and promotional costs as Sun scaled its speciality business in the US.
India sales, which make up about a third of revenue, grew 11% on healthy volumes and new launches, while emerging markets and RoW rose in double digits.
The US business, around 30% of revenue, declined 4% as generics softened, but the speciality portfolio—led by Ilumya, Cequa, Winlevi, and Leqselvi—continued to gain traction and is expected to remain the key growth driver in the coming quarters.
Looking ahead, management expects the speciality business to remain the key growth driver. The company plans to file for Ilumya’s psoriatic arthritis indication before the end of 2025 and launch Unloxcyt, its newly acquired immunotherapy, in H2FY26.
It continues to expand its footprint in ophthalmology and dermatology while preparing for GLP-1-related launches in India next year. R&D spend stood at 5.6% of sales and will remain elevated to support new filings and innovative therapies.
At around 36 times 2025-26 earnings, Sun Pharma trades at a premium to its long-term median valuation of 31.
With India's growth steady, US speciality traction building and a deep pipeline across chronic and innovative therapies, the company’s long-term thesis remains intact.
Ambuja Cements Ltd
Ambuja Cements, part of the Adani Group, has seen its stock recover modestly in 2025 after a sharp correction the previous year. Improved execution and consistent cost savings have drawn investor attention, with the company delivering its highest-ever second-quarter revenue and volumes in Q2FY26.
Q2FY26 consolidated revenue grew 22% year-on-year, while volumes rose 21%. Ebitda per tonne stood at ₹1,060, supported by 5% lower cost of sales and operating synergies from acquired assets.
Margins improved as freight expenses fell and power and fuel costs stabilized. On a comparable basis, existing assets (Ambuja and ACC) delivered Ebitda of ₹1,189 per tonne, while overall Ebitda rose sharply year-on-year, supported by lower costs and synergy benefits from recent acquisitions. The company maintained its focus on cost efficiency and expects to deliver a four-digit per tonne Ebitda consistently in the coming quarters.
Looking ahead, Ambuja Cements has raised its 2027-28 capacity target to 155 million tonnes from 140 million tonnes earlier. The incremental 15 million tonnes will be achieved through debottlenecking at a low capital cost of around $48 per tonne. A 4 MTPA kiln at Bhatapara and a 2 MTPA grinding unit at Krishnapatnam are already operational, with an additional 7 MTPA capacity to come online by early 2025-26. Capex for 2025-26 is guided at ₹9,000-10,000 crore, funded through internal accruals.
At around 24 times earnings, the stock trades at a discount to its three-year median of around 32.
With cost savings firmly on track, a strong expansion roadmap and the balance sheet debt-free, Ambuja Cements looks better placed to sustain margin-led growth over FY26-28.
In conclusion
Even in a market crowded with short-term trades and sector rotations, bluechip stocks remain the steady core of any portfolio. They bring scale, consistency and the financial strength to withstand cycles. The key is to identify those where fundamentals are intact, earnings are improving, and valuations still offer room for re-rating.
The past year reminded investors that even the biggest names can stumble when sentiment turns. But when balance sheets are strong and businesses continue to execute, these corrections often set the stage for the next phase of compounding.
For long-term investors, the opportunity lies in staying selective and patient; owning quality companies through the dull phases as well as the rallies. Those that emerge stronger from this phase of consolidation could well define the next leg of leadership in 2026 and beyond.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
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