If you have a slightly longer investment horizon for 5 years, you could look at various investment options. However, it would also depend on your ability to take risk and also considering tax liability. Higher the ability to take risk, higher would be the returns.
Shares of ICICI Bank
Shares in ICICI Bank have fallen sharply and almost halved in value, in the last 1 year. There is an element of risk involved in shares, but, most important is buying things at the right prices, whether it is shares or real estate.
ICICI Bank shares have fallen largely on account of the sharp increase in non performing assets of the bank. In fact, it has fallen from levels of Rs 350 prevailing exactly a year ago to the current levels of Rs 190.
The stock is trading at a p/e of just 10 times one year forward earnings. This is pretty low. Secondly, we believe there is tremendous value in some of the subsidiaries of the bank, including ICICI Prudential Life, ICICI Direct etc.
This may not have been necessarily factored by the markets. As the economy recovers it's highly likely that the non performing assets of the bank would reduce. Also, the bank is looking at increasingly changing its strategy to retail lending. This could pay dividends in the medium to long term.
There is a scope of the shares rallying as they are down to a near 3-year low.
KTDFC Fixed Deposits
KTDFC Fixed Deposits, are company fixed deposits, but, they are relatively safe as compared to any other company fixed deposits. This is because these deposits are backed by the government of Kerala. If you place the deposit for 5 years, you get an interest rate of 8.25 per cent. This gives you a yield of almost 10.17 per annum. This is fantastic considering that interest rates in the economy have fallen tremendously in the last 1 year.
You can also invest for a period of 3 years, where you will get an interest rate of 8.75 per cent per annum. As mentioned earlier this is an excellent choice for those looking at an investment plan of 5 years.
The one good thing about these deposits also is that if interest rates fall in the next few years, you need not be unduly worried, given the fact that you have lock-in money at higher interest rates.
The one drawback, however is that fixed deposits of companies attract tax. What this means is that there would be a tax liability. An amount over Rs 5000 would attract a TDS.
Equity Linked Savings Schemes (ELSS) are also a good investment bet. Unlike the above, which do not offer tax benefits, these can offer you tax benefits under Sec 80C of the Income Tax Act. The tax limit is up to Rs 1.5 lakhs. Interestingly, while this instrument comes with a lock-in of only 3 years, you must invest with a time frame of 5 years, to get the best returns possible. So, if you have an investment plan for 5 years, do not ignore the ELSS.
There are many ELSS Schemes in India that you can consider including the ICICI Prudential Long Term Equity. However, these schemes have an element of risk, as bulk of the money is invested in shares. However, if you have a longer term horizon, there is a bright probability of making money in these investments
Shares in Oil and Natural Gas (ONGC) have fallen in line with crude prices. The company is a good dividend paying company and the dividend yield on the stock is almost 4 per cent. We believe that crude prices at some stage have to rally and when that happens we could see a good rally in the stock price of ONGC.
The stock has fallen from levels of Rs 340 to the current levels of Rs 210. If the stock dips below the Rs 200 mark, it could be a good bet. But the stock if you are having a long term perspective in mind.
The above is not a solicitation to buy and sell securities mentioned above. Neither Greynium Information, nor the author should be held responsible for losses incurred on investment decisions based on the above article. Please seek professional advise.