Skip to main content

CONTRA view on financial stocks

Five reasons why as an investor you should hold on to your financial stocks.

  • UNDER PENETRATED

According to a report by Boston Consultancy Group, India has the second largest financially excluded population of about 135 million, which is next only to China. Though the development in terms of technology, regulation and compliance has taken place vary rapidly, the financial services sector in India still remains highly under penetrated. Just imagine how big is the opportunity that needs to be tapped. This should be enough motivation for an investor to remain invested in financial stocks.

  • EVOLVING CAPITAL MARKET

As per rough estimates, only about 2% of Indian population of 1.1 billion invest in capital markets. Of this, individuals invest only 5% of their total savings into stock markets — an indication of the kind of potential Indian financial services have. The sharp rise in India’s stock markets since 2003 reflects its improving macroeconomic fundamentals. The next growth opportunities, believe analysts, will come from online trading, internet banking, currency derivatives and commodity derivatives in this space. Thus, analysts believe if you hold stocks of brokerage houses, there’s no reason to panic, as growth prospects are robust and will be highly rewarding in days to come.

  • LACK OF LINKAGES

The Indian financial sector has remained relatively sheltered from the ongoing volatility in the global markets. The firms in the financial services space don’t have any substantial linkage to the subprime losses in the US except for some banks, which is too low to have any bearing impact. The lack of linkages means they are comparatively insulated against volatility in global markets.

  • ATTRACTIVE VALUATION

For the long-term investor, current valuations are fairly attractive. The financial stocks have already factored in negative sentiments. Analysts advise that one could start accumulating value stocks in the financial services space in one’s portfolio. Almost all public sector banks are trading at book values. They have all reduced their non-performing loan book. With a strong retail franchisee network and expanding horizons through bancassurance channel, they will be the king of good times in future.

In the current scenario, when the index has gone down by almost 40% and financial services have taken a big hit due to the financial turmoil in the US and European markets, the valuation has become really compelling and very attractive for investors who have a two to three years horizon.

  • CONTRARIAN THOUGHT

The time to buy is when blood is running on the streets. This is a renowned dictum which was issued by Baron Nathan Rothschild in the early 19th century. If you believe in contrarian approach to investing, then there cannot be a better opportunity than now to buy financial stocks. Offloading the financial stocks in the crisis is comparable to selling your livestock during a drought.

Thus, it’s important that you are fully aware of financial considerations of selling stock in a market bottoming out.

Popular posts from this blog

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...

WEALTH TAX

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 WEALTH TAX   WHAT CONSTITUTES WEALTH? For wealth tax purposes, "wealth" means property , urban land, car, jewellery , yacht, boat, aircraft and cash in hand in excess of Rs 50,000. CAUTION POINT | Do not think you will have an easy escape from wealth tax by transferring your `wealth' without consideration to your spouse or minor child. Such assets will also be considered as your wealth. HOW TO DETERMINE YOUR TAXABLE WEALTH Add the taxable value of the above assets (computed as per the detailed rules for valuation) owned by you as on March 31 (for FY 2014-15, it will be March 31, 2015). In case you sold your car during the year, it will not be taxable wealth. Deduct loans if any obtained by you to acquire any of the taxable assets from the value of gross tax out for at least 300 days in a...

Equity Savings Fund

Invest Equity Savings Fund Online   The best part about these funds is that they are subject to equity fund taxation and at the same time are structured like MIP like funds . This new category, equity savings funds , offer a little of everything. They allocate money to equities & equity related instruments, and fixed income. They aim to generate returns by diversification. Such funds invest in fixed income and arbitrage to protect the investors from short term volatility and equity for capital gains. The best part of these funds is that they are subject to equity fund taxation and at the same time are structured like MIP funds.   MIP funds however are subject to debt fund taxation. Investors Equity savings funds are suitable for the following: First time investors who seek partial exposure to equity with less volatility and greater stability Investors seeking moderate capital appreciation with relatively lower risk Those wh...

How to Pick Top Performing Mutual Fund Schemes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to Pick Performing Schemes  Funds that continue to stay in the top grade of performance over longer periods are the ones to bet on, advise investment experts   The mutual fund performance charts of the past few months make for an impressive reading. Funds across all categories boast of stellar returns. Sample this: The mid and small cap category has averaged 77 percent return over the past 12 months, with the best fund delivering a staggering 120 percent. The tax-saving funds also average an impressive 51 percent, including a fund which has soared 92 percent. Many of the table-toppers are funds of proven quality and track record. However, there are also schemes that are not that well-known. Some of these have rarely made it to the performance charts in the past, yet, of late, they bo...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now