It has been mayhem in the markets since the last week, though Tuesday saw some recovery.
The worst hit in the last one week have been banking and Non Banking Financial Companies (NBFCs). Most of these stocks during this period have hit 52-week lows, including the likes of Dewan Housing, Yes Bank, Indiabulls Housing, Punjab National Bank, CanFin Homes, GIC Housing and a host of other PSU owned banks.
The trigger for the collapse in these stocks have been the debt repayment worries of IL&FS, which raised fears that there maybe a contagion that could spread. Bond yields have hardened, which led to a huge drop in the price of banks and NBFC stocks.
Should you buy these stocks?
Based on valuations some of these stocks are definitely look attractive, provided there is no calamity that unfolds due to the IL&FS crisis. For example, Yes Bank shares have reached a p/e multiple of just under 10 times one year forward earnings. In fact, the price to book of less than 2 times also makes the shares of the bank very attractive.
However, attractive pricing comes with risk. Many analysts believe that the exit of Rana Kapoor from the bank on Jan 31, 2019, could lead to slowing of growth at the bank. One would have to also wait and watch to see who would takeover as the next CEO at Yes Bank.
Indiabulls Housing Finance again looks an attractive bet at under 10 times one year forward p/e. The stock has fallen from levels of Rs 1400 to the current levels of Rs 930. In fact, on Friday it had hit a low of as much as Rs 785.
If you are willing to take a risk, then Dewan Housing too may not be a bad bet at all. The stock again is trading under 10 times, one year forward earnings, which should be a good bet.
Understanding the risks
If the risks pertaining to IL&FS and the cost of borrowing start waning, you should definitely see some respite and action in the above mention stocks. We wish to state that some of these stocks have halved in value, which have made them attractive bets.
If you are a long-term buyer, some of these stocks could offer good value. However, you need to be very careful and buy at the right price. Await for the markets to settle and the prices before you buy these shares.