There is a saying: "You either get good prices or good news, you cannot get both". Look at the banking and finance stocks today. Several good quality names are languishing, thanks to the IL&FS issue, liquidity issues and then worries over DHFL debt repayments.
Is is time to buy finance and banking stocks?
The risk reward ratio at the moment in some select names, could be really good. There is an element of risk in some banking names like Yes Bank, which may still have more NPAs down the line. However, if the bank manages to raise capital from p/e players like Axis Bank did a couple of years ago, the bank maybe on a recovery path 2-3 years down the line.
It's just about betting on things working out, even though the bank has been extremely transparent under new CEO Ravneet Gill. The shares have fallen from Rs 404 to Rs 116 and at these levels, one might want to take a risk. It is also near book value levels, which makes it a good buy, though we wish to re-iterate again that it could also be a risky bet.
Names like L&T Finance Holdings too maybe a good bet
The shares of L&T Finance Holdings too has fallen from levels of Rs 200 to the current levels of Rs 117. At these levels it is almost at a 52-week low. The company is not facing any liquidity issues and in fact, its home loan book grew by near 50 per cent in 2018-19, largely comprising of individuals. The company also has a strong pedigree and risks are very limited when compared to other NBFCs.
L&T Finance Holdings also regularly pays dividend and when there is strong brand equity, there is unlikely to be a huge slump in the share price.
The stock is also available at around 10 times one year forward earnings, which makes it attractive. It has only been punished because of problems in the NBFC sector.
Jammu and Kashmir Bank
This bank reported a fantastic set of numbers for the quarter ending March 31, 2019. Recently, there were reports of corruption and nepotism against the former chairman of the bank, which resulted in the stock price losing as much as 10 per cent. However, at these levels the stock becomes a great bet.
The bank reported a sharp increase in its EPS to Rs 8 for the quarter ending March 31, 2019, alongside a drop in the NPAs. The bank has a solid presence in its home state of Jammu and Kashmir.
The shares are also trading at a price to book value of 0.44 times. The shares are a good bet if one has a long term perspective in mind.
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