New Banking Licenses in India – The Winners

If everything goes according to RBI’s plan, then very soon we would have the names of new banks to bank with. Only hindrance to announcement of winners’ names could be Election Commission’s Model Code of Conduct for political parties. This code restricts existing government from making any announcements that can influence voters in coming elections, scheduled to take place between 7th April 2014 and 12th May 2014.

The committee under former RBI governor Bimal Jalan has already submitted its final recommendations and by now, (and most probably) RBI Governor would have clear knowledge about who is getting the banking license. But before public declaration of results, RBI is expected to take approvals from Election Commission to stay within the legal boundations of Model Code of Conduct.

So before RBI announces it, I am trying to make an educated guess about who all are going to get the banking licenses.

And my guesses are:

L&T Financial Holdings

Aditya Birla Nuvo

Muthoot Finance

Indian Post

I am not very sure about Indian Post getting the license. And that is even though I want it to get it. Reason for the same is that though everyone in this under-banked country is focusing on 150,000+ post offices which Indian Post has, the fact remains that most of these customer touch points are not in very usable condition. Another factor which might play against Indian Post is that this time, licenses were supposed to be granted to private players. And Indian Post is hardly private. 🙂

And if you do believe in concept of insider information then just have look at below graph. It shows share price movement of few of the above mentioned names in last one month. Do you feel that somebody, somewhere knows something? 🙂 🙂

New Banking License India Share Price
Banking Hopefuls : Share Price Movement in last One Month

So what do you think? Who will get the license this time?



2014 Would Be A Good One For Stocks. But…

I was browsing through morning newspaper when the following headlines caught my eye –

Indian Mid cap stocks
And another similar optimistic one was present in the online edition of the same newspaper –

2014 to be a hot year for equities” (source- Economic Times).

The first thought which crossed my mind after seeing such eye-catching headlines was that everybody is turning bullish these days. So by being cautious as usual, was I being stupid?

And to tell you the truth, I have personally observed that during last 6 months or so, people have become more comfortable, or rather more ‘confident’ talking about investing and ‘making-money’ in stock markets. So is it that just because everyone else one has started talking about it, and business channels are discussing number like 25,000 for Sensex and 7500 for Nifty, does it mean that 2014 would a good year for stock markets? To be brutally honest with you, I don’t know. And please understand that in this world, Nobody can predict anything with 100% confidence.

But remember, there is a very thin line between confidence and over-confidence. And one generally does not realize when one crosses that line.

And with current PE close to 18.5 (Market PE details), the Indian markets are not very cheap. There may be some sectors which might be actually cheap. But overall large cap space is not that cheap as the headlines may make it appear like. So take a sensible call, weigh your options and your risk appetite. There are some big newsflow scheduled for 2014 (general elections, new banking license). Keep a sensible head on your shoulders and be greedy when others are fearful.


5 Thoughts For Investing In 2014

The year 2013 has ended. And today being the first Sunday of 2014, I have luckily got some free time to sip a cup of hot coffee and to think about what might happen in 2014, and how it would affect stocks, investments and my portfolio.
coffee 2014
First Sunday Coffee || 2014
Indian Markets Are Not Cheap
With large cap indices like Sensex and Nifty50 trading at 18-19 times earnings, it is quite clear that as of now, Indian markets are not (very) cheap. [Read more about how to know whether Indian markets are trading cheap or not here]. Experts might tell you that current PE ratios are 14 and 15. But that is because they are considering earnings in 2015 and 2016. Not 2013 and 2014. So, don’t believe too much of what experts have to say. And if you like watching business channels like CNBC, then do it for just one reason. 😉
Keep Cash At Hand
If the markets are not cheap, then it’s a good idea to stay out of markets for the time being and start hoarding cash. Because it is only a matter of time, when markets would once again regress towards the mean and correct (valuation wise) and give some tremendous buying opportunities. And you don’t want to run out of cash when there is a distress-share sale. Isn’t it?
Invest In Business, Not In Politics
With Aam Aadmi Party’s surprising win in Delhi, it seems that everybody has become an expert in politics. And with BJP and Congress ready to fight it out in the coming elections, it is inevitable that someone, somewhere would recommend you to buy shares of companies which might benefit from either party’s coming to power. Though it may seem like a good idea to buy stocks of companies which are friends with possible election winners. But this can be risky. You can never be sure of who is going to win these elections. Did any one of us had even a slight idea that within 6 months of active politics, Mr Kejriwal would become Delhi’s CM? So the point which I am trying to make is that almost anything can happen in politics. It is better to buy shares of a company because its business is good and its shares are available at a good price. And not because its owners are friends of Prime Ministers-To-Be. Period.
Beware Of New Banks
With only a few months remaining before the new banking license are awarded, its obvious that one would become quite excited about this episode and try to guess the names of new banks before RBI does it. Though it seems and is highly possible that prices of applicants who get the new banking licenses would soar, the fact remains that banking as a business is not easy. And though India is under-banked, it is also true that the existing banks are pretty strong and would not allow new players to take their turf easily. So, I am not saying that don’t buy stocks of new applicants. I am just saying that it’s a bad idea to become over excited about the whole issue. Just be fearful when others are greedy. Remember Reliance Power  and you will understand what I mean. 🙂
I Am Not Investing To Beat The Index
This thought is something which has always been one of my key decision makers. I have always believed that money should be available when one needs it to be. And that should be the whole purpose of investing. So, it does not matter whether I am beating the index or not, as long as I am able to fund my needs, desires and at times, greed(s) 😉 So beating the index would be great, but I am not Warren Buffet, and I am not going to loose even one night’s sleep over it.
So that’s it. These were some of my early-morning-first-sunday-of-new-year-thoughts :-).
I would be happy to hear your thoughts as well as your arguments against my thoughts. It’s always better to debate the initial (raw) thoughts rather than older (established) ones. So do let me know…