We are recommending 2 stocks for those in their 30s, because we believe that individuals in this age group can hold stocks for at least 5-10 years. This is because they are young and can take risk. Also, by now many would have settled and have a steady job and steady income.
You cannot recommend these type of stocks to those in their 40s and 50s as their risk taking ability may have reduced now with their age. Also, these shares can give you superb returns over a 5-10 years time frame.
Development Credit Bank or DCB is a private sector bank. Typically, private sector banks have given super returns in the last 5-10 years.
There was a time two years back when Yes Bank was quoting at just Rs 233 (Aug 2013). The stock is now up 3 and half times at Rs 820.
IndusInd Iank is another example of a stock which is August of 2013 was quoting at just Rs 330. It is now at Rs 821.
Axis Bank, HDFC Bank and ICICI Bank are all examples of private sector banks that have yielded superb returns in the last 5-10 years.
Development Credit Bank has not yet reached that stage in terms of size and assets. But, if the rapid expansion and improvement in asset quality are any indication, the bank is headed in the right direction.
The asset quality was strong with gross non performing assets and net non performing assets seeing a solid improvement at 1.76 per cent & 1 per cent for the quarter ending March 31, 2015.
The bank's dependence on bulk deposits is very limited and it fast expanding its branch network.
This would mean that the amount generated from the more profitable current and savings accounts would improve as branch network improves.
For FY 2016-17, one can expect an EPS of around Rs 10. At the current market price of Rs 125, that means a price to earnings multiple of just 12.5. One can expect the share to generate substantial returns in the next few years.
Recently brokerage firms like Arihant Capital, ICICI Direct, Emkay Global and Finquest have placed a buy on the stock.
Infrastructure Development Finance Corporation (IDFC) is another excellent bet from a 5-10 year perspective.
The institution recently got a license from RBI for setting up a private sector bank. It may soon open its first branch sometime this year, probably by Oct 2015. The stock has fallen in recent times to Rs 147 making it a good pick.
Once it is converted into a bank existing shareholders of IDFC will get one share of the bank. Over a 5 year period IDFC's banking entity would be able to provide low cost funds through CASA.
Transformation into a bank has already begun. A few heads for the bank have already been appointed. Analysts believe that by 2018, the bank would have increased its branches tremendously and have easy access to low cost deposits.
This is hence a long term play for those willing to hold the shares for at least 5 years.
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