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

Retirement planning from a long-term perspective

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds     `HOW green was my valley'. This title comes from a movie I had watched many years ago. A little boy's journey into adulthood and the story of a Welsh valley's turn of-the-century descent from pristine paradise to despoiled coal mining.   I thought of the title because it is comparatively reflective of a person's life ­ the glorious years when he is earning and the sun down years when he is not having his regular job and, hence, his living standards comes down. The reason is a combination of things. Inflation of food items, transport, increase in health related costs in the later years of life and increase in expenses in almost all basic amenities of life. In India, the social security system is almost non-existent. In some states, wherever it is available, the scales of benefits are extremely modest...

CNX Midcap vs BNP Paribas Midcap Fund

BNP Paribas Midcap Fund - Invest Online   Te  performance of BNP Paribas Midcap Fund  – which has across the last 3 years generated superior returns over the benchmark – especially when the markets have gone down the fund has handsomely outperformed the benchmark preserving the capital of the investors. The fund has been able to do this only due to the superior stock selection process ( BMV approach) that is diligently followed at BNPP.   Highlights of BNP Paribas Mid Cap Fund:   Investment Objective : BNP Paribas Mid Cap Fund gives an investor exposure to invest in the various quality midcap stocks. The fund also has some exposure to large as well as small cap stocks.   Investment Approach : BMV ( Quality and scalability of Business →Good Management → Reasonable Valuation ) with Bottom-up stock picking.   Most of the investors are way happier if the fund that they have invested in is a significant Outperformer in tough times than in Good ti...

Investment Strategy - What is Sector Rotation Theory?

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)   The economy goes through cycles : it expands for a few years and then contracts. Study of historical data suggests that different sectors tend to perform well on the stock markets during different stages of the economic cycle. While history never repeats itself exactly, some broad patterns tend to recur. Investors can take advantage of the sector rotation theory to move their money from those sectors that have seen their best times to those that are likely to do well in future.   The person who developed the sector rotation theory is Sam Stovall, chief investment strategist at Standard & Poor's. He developed this theory by studying data on economic cycles going as far back as 1854 provided by the National Bureau of Economic Research ( NBER ) of the US.   When trying to correlate stock-market perfor...

Factors Affecting Silver Rates in India

  Factors Affecting Silver Rates in India There are a lot of factors at play that impact silver prices in India. Even though silver rates have shown a steady increase over the last two decades, the historical trends should not be taken as a benchmark when considering future price volatility. Investment in silver as a commodity has gained steam in the country, and investors need to factor in various variables if they are to make decent profits from silver in the short/long run. Large investors:   The silver market is much smaller than the gold market. As such, large investors or traders can potentially influence silver prices. A point in case here is Warren Buffet buying 130 million troy ounces of silver in 1997 at $4.50/ounce, which impacted market prices. Oil prices:   Mining of silver is an energy-intensive process, and so silver prices are correlated with oil prices, the primary energy source in today's world. Also, imported silver requires a strong logistics platform backed by ...

LIC's JEEVAN SHIKHAR

  LIC's Jeevan Shikhar is a participating, non-linked, saving cum protection single premium plan wherein the risk cover is ten times of Tabular Single Premium. The proposer will have an option to choose the Maturity Sum Assured. The premium payable shall depend on the chosen amount of Maturity Sum Assured and age at entry of the life assured. This plan also takes care of liquidity need through its loan facility. The plan will be open for sale for a maximum period of 120 days from the date of launch. 1.   BENEFITS   : a) Death Benefit: On death during first five policy years: Before the date of commencement of risk   :   Refund of Single Premium without interest. Single Premium mentioned above shall not include any extra amount if charged under the policy due to underwriting decision and taxes. After the date of commencement of risk   : "Sum Assured on Death" equal to 10 times the tabular single premium shall be payable. On death after completion of five policy years but b...
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