There is an old jungle saying that when Billionaires go shopping, you should keep an eagle eye on them. These people are able to spot changes in trends faster than others, and if you follow their moves, you stand a chance to make a bit of profit.
When, in January 2014, MA Yusuffali walked up quietly to the South Indian Bank counter and bought a chunk of 3 crore shares (2.23%), one could sense that a change in the banking sector was round the corner. At that time, banking stocks were totally out of favour owing to the high interest rates and rising NPAs. South Indian Bank itself was languishing at Rs. 21.
Today, when South Indian Bank sprinted 5% to cross Rs. 25, you could sense the gentle smile on MA Yusuffali’s face. He knows his bet is paying off, slowly and steadily.
MA Yusuffali also has a huge chunk of shares in Federal Bank (315.77 lakh shares, 3.69%) & Dhanlaxmi Bank (4.88%) which are also starting to look up. In fact, his holding in Federal Bank is worth in excess of Rs. 300 crore.
Now, fortunately for us, it is still not too late to look at MA Yusuffali for inspiration and to tuck into banking stocks. Banking stocks are still out of favour with the masses owing to the high interest rates. When the masses get a whiff that interest rates are being lowered, they will descend on banking stocks and send the prices spiraling up. We need to grab our share of the stocks before that happens.
Speaking for myself, I have my eye on HDFC Bank, which is a powerhouse blue chip stock by all standards. The only reason it is subdued at present is because of the uncertainty regarding the increase in FII ownership limit. Once that issue is resolved, the stock is expected to make up for lost time.
I am also tucking into PSU Bank stocks which have been battered to an extent where the risk-reward ratio is in favour of an investment. A report in the ET reveals the extent of undervaluation in these stocks. Also, Tabassum Inamdar of Goldman Sachs has now sounded the bugle that the time is ripe to buy PSU Bank stocks.
Another stock that I am nibbling at is Repco Home Finance which appears to be on the way to become a powerhouse stock like its illustrious peer Gruh Finance. This stock comes highly recommended by Basant Maheshwari, whose stock recommendations are not to be taken lightly.
I also have a nice little chunk of IndusInd Bank and Bajaj Finance in my portfolio which I intend to add to on dips.