Friday, April 23, 2010

Best Indian Stocks – Finance

To start with, I take immense pleasure and pride in telling the readers that some of my recent recommendations have given exceptional returns over the last 2 months and the fact that these stocks are going to give even more returns in future further adds spice to it.

I have recommended Parekh Aluminex, Usher Agro and Brandhouse retail in my last two articles(http://www.stockanalysisonline.com/2010/02/best-indian-stocks-for-short-medium.html) and all these three stocks have given more than 70% returns in the last two months. In fact Brandhouse is up 89% followed by Usher agro (85%) and Parekh Aluminex (75%). I have invested in these stocks and have made some money and I do not know how many who read my blog invested in it. But if you have invested and made money, I am happy for you.

As a sequel to my last two posts, I am giving here some of my thoughts regarding financial stocks that can be bought at this period of time (April 23, 2010). I am not going to recommend stocks like HDFC, State Bank of India and HDFC Bank as all these top stocks are trading at higher valuations than peers. But I am going to tell few stocks that are trading at relatively cheaper levels compared to other private banking peers.

Why Financial Stocks?

The recession that haunted us for the last two years is slowly giving way for prosperity. Financial companies are going to be playing a huge role in shaping our economy through high domestic consumption and discretionary spending. Disposable income of the middle income population is increasing and that’s going to be the trend for the next 2-3 decades which will highly influence the discretionary spending. People will go for Auto loans, Home loans, Personal loans and they might also invest in stocks and other financial instruments. All these activities are directly linked with the financial companies one way or other and that is a good enough reason to think about financial stocks. No brainer !!!



Mahindra & Mahindra Financial Services

This is a Non Banking Financial Company (NBFC) involved in Auto loans (primarily to Mahindra vehicles), Home loans, Rural financing and Personal loans. They also accept deposits. If you look at the numbers, Mahindra Finance clearly outsmarts other similar peers and is trading at far lesser valuations considering the potential. It has announced bumper result for the Q4 FY10 quarter and EPS for the current year stands at Rs.35. The stock is trading at Rs.425 with a PE Multiple of only 12.5 which is huge discount to other financial stocks like Shriram Transport Finance, Kotak Mahindra Bank, Yes Bank, Axis Bank and Indusind Bank. Only public sector banks trade at lesser valuations. They might also apply for banking license in the coming years and the company has huge potential to tap the Indian domestic consumption. I believe this stock can give multifold returns in the next 5 years.


Indiabulls Financial Service

Indiabulls Financial Service provides Home loans, Vehicle loans, Personal loans and Consumer Credit and is one of the fastest growing companies in India. Once the economy improves and the real estate market picks up, Indiabulls is better positioned to take advantage of the huge discretionary spending. As a parent company Indiabulls Financial Service has stakes in subsidiaries as well. The stock is trading at Rs.130 with a PE Multiple of 13 (EPS – Rs.10) and considering the huge potential in this sector, this can give excellent returns over the long term.


India Infoline

India Infoline covers the entire financial services spectrum which includes brokerage, home loans, auto loans, personal loans, Asset management, wealth management and commodity trading. Brokerage business is going to pick up soon (Once the market improves and people start investing in equities) and they distribute loans through moneyline brand which might get listed in future. Financial position of the company is good and considering the many businesses that are under, this company can give very good returns in another 5 years. Currently this stock is trading at Rs.115 with a PE Multiple of 16.5 (EPS – Rs.7).






GRUH Finance

Promoted by HDFC, this company has announced very good Q4 FY10 result. GRUH again involved in Housing finance but primarily cater to the rural population. GRUH is trading at Rs.253 at a PE Multiple of 13 (Rs.19.86 *13). HDFC has 61% holding in GRUH and considering the parent company success, GRUH can give serious returns over the long term.

Apart from the above mentioned companies, there are few more good ones which I am giving below.

LIC Housing Finance
GIC Housing Finance Limited
Dewan Housing Finance company

I am not saying that people should invest in all the above stocks. But based in the risk appetite, one can choose 1 or 2 stocks among the above mentioned ones and start accumulating. Once the market improves and Bull Run sets in, you will not repent your decision.

Kumaran Seenivasan
http://www.stockanalysisonline.com/

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