The index is at record highs and any investment in small stocks under Rs 100, can always be risky. However, here are a few stocks that are under Rs 100 and could be worthy picks. A few stocks like South Indian Bank maybe excellent pick on fundamentals.
However, some are classic turnaround stories and could generate tremendous wealth in the next few years. Here are a few stocks under Rs 100 that one should buy from a 2-3 year perspective.
South Indian Bank
South Indian Bank reported a strong set of numbers for the financial year 2017-18. Advances for the bank during the year grew at 17 per cent, while the retail book (excluding gold, agriculture and SME) grew a decent 20 per cent.
The CASA and the deposits of the bank also grew at a healthy pace of 9 per cent, during the year. The net interest income on the other hand grew 14 per cent. Overall, the bank performed exceedingly well during FY 2017-18.
However, during the first quarter ending June 30, 2018, the company reported a weakish set of numbers, which led to a slump in the stock price to a 52-week low of Rs 16 However, at these levels there remains very little downward risk.
South Indian Bank: Cheap on the valuations front
The bank is likely to adopt an aggressive approach even while keeping, NPAs under control.
The strategy of the bank as outlined recently is to improve the CASA, even while expanding the retail book. It also plans to keep the NPAs under control, while expanding the net interest margins of the bank.
In the retail business the company will lay emphasis on home loans.
To meet that objective, South Indian Bank will set a retail hub in Kochi to increase focus on housing finance, with dedicated Officers for marketing retail loans. It will also take marketing initiative through TVCs and promote tailor made products for different segments.
At a time when it is difficult time to find good quality banking stocks, at an attractive valuation, this could be a good stock under Rs 100 to buy. The South Indian Bank shares at Rs 16 is trading at just 12 times one year forward p/e. A good stock under Rs 100 to buy for the long-term.
As government owned banks are quickly losing market share, and are starved of capital, private sector banks are likely to gain market share rapidly in the years to come.
Karnataka Bank, a private sector player is not a stock that is under Rs 100, but, at Rs 112 is very close to that. In fact, the shares have hit a new 52-week low of Rs 105. The bank also pays a good dividend and last declared a dividend of Rs 3 per share.
The bank has a book value of Rs 181 and the stock is available, at just Rs 116, placing it at a price to book of 0.70, which is one of the cheapest in the banking space.
Karnataka bank: Reasonable on valuations
While the price to book at 0.60 times is cheap, the stock is also available at a one year forward p/e of just 10 times.
This is extremely cheap for a private sector bank. The bank also has branches of more than 800, which means a decent franchisee network. While on most parameters the shares remain a good pick, rising interest rates will remain a concern for the banking sector.
However, non performing assets may plateau in the coming months, which should augur well for some private sector players like Karnataka Bank. In fact, the bank managed to reduce its Gross NPAs to 4.72 for the quarter ending June 30, 2018 from 4.92 in the previous quarter.
Buy the shares for the long term.
Reliance Home Finance is a stock that was carved out off Reliance Capital. This stock got listed at Rs 114 and had fallen since to Rs 61.
At the time of listing most brokerages had estimated the stock to list around Rs 120, which would be 3 times anticipated book value for 2018 of Rs 40.
However, the shares of Reliance Home Finance have fallen consistently and at these levels they look very attractive.
One of the top reasons to recommend this stock would be the home finance business, which is itself growing at a rapid pace of 20 per cent. This leaves immense potential to cater to a growing market for the company.
The management of the company had recently said that it plans to increase its book size to a staggering Rs 50,000 crores in the coming years. The book size at the moment is around Rs 13,000 crores. Going ahead this should augur well for Reliance Home Finance.
Check stock quote of Reliance Home Finance
Valuations of Reliance Home Finance
The stock of Reliance Home Finance is barely traded at 1.5 times anticipated book value. This is much lower than peers like Gruh Finance, Repco Home or even any of the larger players like HDFC, PNB Housing Finance, Dewan Housing Finance, Indiabulls Housing Finance etc.
This leave tremendous scope for Reliance Home Finance in terms of valuations. Sentiments for ADAG group stocks have been positive on account of RCom's plans to sell its assets to Reliance Jio. This provides an opportunity for long term investors to enter the stock.
A list of small cap stocks that you can buy
We have also in the past recommended some small and mid cap stocks that you should own. These have the potential to generate good returns in the coming years. Read by clicking on the links below:
Taxation on shares below Rs 100
It is important to note that if you sell your shares at a profit before one year, you are liable to pay taxes and its does not matter whether your shares are under Rs 100 or not.
Short term capital gains tax on shares is applicable if you sell your shares before one year. On the other hand, if you sell your shares after a period of one year, there is a tax liability that has been implemented from 2018-19. So, you need to factor the same before you sell your shares.
It is advised that if you are making a decent sum you can also pay the required taxes on the same.
The article is not a solicitation to buy, sell in securities or other financial instruments mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and do not accept culpability for losses and/or damages arising based on information in this article.
Also read: The best dividend yield companies in India