At near 37,500 points on the Sensex, the markets are not very cheap. Here are a few stocks that are under Rs 100 and could be worthy picks. In fact, many shares from the banking and NBFC sector are now at mouth watering levels, which could make them worthy picks from a 2-3 years perspective.
L& Finance Holdings
This stock has fallen from levels of Rs 180 to the current levels of Rs 80. There are worries of a slowdown in the auto sector, where the company is a major player.
Sentiments for the NBFC sector in general are not too great. Worries over debt downgrades, liquidity issues and ability to raise capital have left many investors worried. However, we do not see that as a major problem for L&T Finance Holdings, given its strong pedigree.
The company is likely to continue to see growth, though the next few quarters could well be challenging. The shares of the company are trading at a p/e of just 8 times, which makes it very attractive.
L&T Finance Holdings: A longer holding period
It would also be advisable to have a longer holding period, just in case you intend to buy the stock of L&T Finance Holdings.
This is because for the next few quarters, it could be challenging times for the NBFC sector and hence most of the margin pressures, npa pressures would be evident.
However, we do not see this playing beyond the next few quarters. Hence, if you have a holding period of more than 12-15 months, you could reap rich dividends. Buy the L&T Finance Holdings stock, as the same is now trading at just two times book value.
Punjab National Bank
Punjab National Bank is a stock that has now fallen to 52-week lows of Rs 58. Worries for the banking sector persist. There are concerns over debt defaults from some large groups.
Apart from this sentiments have taken a hit, due to the scam at PMC bank. this has led to some sharp and severe declines in most banking and NBFC stocks.
However, we believe that in the next few quarters, we may see some recovery in the economy and hence in most banking shares. PNB could be one of the beneficiaries of a revival in the economy. The bank has also gone all out in debt recovery and the merger with other banks may bode well for it. Buy the shares at the current price of Rs 58.
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, whose stock at Rs 72, is not very expensive. In fact, the shares had hit a new 52-week low of Rs 71.20 only recently. 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 72, placing it at a price to book of 0.38 times, which is one of the cheapest in the banking space.
Karnataka Bank: Reasonable on valuations
While the price to book at 0.38 times is cheap, the stock is also available at a one year forward p/e of just 6 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.
The financial performance for the quarter ending June 30, 2019 have also been good. Interest rates are also slated to fall, with the Reserve Bank of India having cut interest rates twice now this year. This is likely to benefit a bank like Karnataka Bank. This is a stock that is well below Rs 100, we thought it would be worth recommending for investors to buy from a long to medium term perspective.
Buy the shares for the long term.
Federal Bank reported a good set of quarterly numbers for the period ending March 31, 2019. Net profits at the bank surged and non performing assets were significantly lower.
Overall, the bank is moving in the right direction to build strong and sustainable earnings momentum. BY FY21 estimated, the target price could be Rs 125 per share valuing the stock at 1.7x FY21E anticipated book value.
The banking sector itself is seeing tremendous buying support fro investors, as interest rates are headed lower. Buy the shares below Rs 100 for a price target of Rs 125.
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.