The finance industry does play a crucial role in shaping the country’s global economy. Buying any size of a finance stock denotes your investment in banking, credit cards, insurance, and other types of financial service providers.
Finance stocks hold onto the shares of companies that are said to be running the business within the financial sector. In today’s blog post, we will discuss everything you need to know and consider before investing in the best financial stocks.
Reasons to invest in financial stocks
The key benefits behind investing in financial stocks are as follows:
- Valid economic growth: The overall economy influences the financial sector, producing exponential growth. For business expansion and improved consumption, there is a valid demand for investment in the banking and insurance sectors.
- Long term performance: The finance sector has been facing exponential growth and performance for years. Finance companies do pay an above average dividend to all their shareholders that help investors create a valid price-to-earning ratio to their investment portfolio.
- Innovation coming from fintech: Financial sector stocks have certainly benefited from recent innovations like mobile payment apps, blockchain, laying down the major groundwork to experience more sector growth.
Best financial stocks in India 2024
The finance sector in India will remain diversified, providing various investment opportunities for new and experienced investors. Upcoming are the top-performing finance stocks based on popularity and ranked based on market capitalisation as of Nov 13, 2024.
Keep in mind that the market size or previous results don’t predict future outcomes, so thorough research and a clear understanding of risk are vital before committing funds.
| Company Name | Market Cap (₹ Cr) | P/E Ratio |
| Bajaj Finance Ltd | 4,09,033 | 26.6 |
| REC Ltd | 1,35,084 | 9.09 |
| Jio Financial Services Ltd | 1,92,187 | 120 |
| Shriram Finance Limited | 1,07,603 | 13.7 |
| HDFC Asset Management Company Limited | 91,748 | 41.5 |
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A quick overview of the best financial stocks
Upcoming is a brief overview that you must consider to understand India’s top finance stocks better.
Bajaj Finance Limited, one of India’s leading non-banking financial companies, offers distinct financial services with a strong customer base around 84 million in FY24. Their long-term goal is to become India’s top-most and best payment and financial service provider company.
Q2 FY25 showed a mix of positive and challenging results. Strong performance in assets, volumes, and efficiency was offset by elevated loan losses, which dampened profitability and return metrics. AUM increased by ₹19,732 crore, with 9.69 million new loans disbursed and 3.98 million additional customers acquired.
REC Limited, previously Rural Electrification Corporation Limited, is on the top list of financial companies providing valid financial assistance for different power projects in India. The company serves clients in central and state power-infrastructure projects.
Reported record profit of ₹7,448 crore for the first half of FY25. Loan portfolio increased by approximately 15% year-over-year, reflecting steady expansion.
Recognized as Maharatna, the company is working to become an uninterrupted and noteworthy financial assistance resource for every other power project about to be established.
Jio Financial Services Limited focuses on crucial customer groups and reaches out to small businesses and individuals often left untapped in sem-urban, urban, and rural parts of India. They aim to provide transparent, easy-to-use financial products that meet India’s evolving financial needs.
By the close of Q2 FY25, net worth stood at ₹1,37,144 crore. Total revenue reached ₹693.85 crore, with net profit at ₹689.07 crore. The company also saw robust engagement, averaging 6.5 million Monthly Active Users (MAUs) across its digital channels.
To know more: Jio Financial Services: Disrupting the insurance and AMC markets
HDFC AMC has established a wider network covering different parts of the country. On September 30-2024, the firm’s AUM was valued at ₹7,686 billion.
The company offers separately managed account and portfolio management services to meet clients’ investment needs, including domestic corporations, family offices, provident funds, and global and domestic institutions. With a 13.2% market share of individual monthly average AUM in September 2024, the company ranks as a top choice among individual investors.
Shriram Finance Ltd. is on the list of best and leading financial service providers in India. The company has been registered as one of the largest retail NBFC (Non Banking Financial Company) providers, offering unique credit-based solutions for loans in various sectors, such as two-wheelers, commercial vehicles, gold, home, and personal.
In Q2 FY25, total income rose by 17.89%, net interest income increased by 16.37%, and profit after tax saw an 18.30% growth compared to Q2 FY24.
Also Read: Market cycles: Riding the rollercoaster of stocks
To wrap it up
Our economy is driven by digital transformation, financial inclusion, and government reforms, which significantly raise the demand for insurance, credit, and investment services. Given the fundamentals of stock buying, holding, and selling, the best financial stocks in India can raise the income of the middle class and anyone looking for an extra income source.
FAQ
- How to choose the best finance stocks for me?
While researching the finance stocks, go for the ones that meet your investment goals and risk tolerance. Investing in established banks is a wise choice as they have stability, while small and fast-growing finance companies offer higher growth potential with more risk added to them. Conduct thorough research on the companies’ recent financial health before investing. You can collect data from the company’s official website and read news articles about their recent advancements to understand the finance stock better.
- What factors can affect the finance stocks?
The performance of any finance stock is influenced by various factors, including:
- Economic conditions that determine the increased or decreased demand for financial services.
- Growth in interest rates can benefit banks, while a falling rate puts pressure on their overall profits.
- Regulatory changes impact the way financial institutions operate and can affect profit levels.
- Finance companies must adapt to technological advancements to stay on the stock radar. Look for established firms to adapt to such changes.
- What sort of risks are generally accompanied while investing in finance stocks?
Unlike any investment, finance stocks come with risks. Consider the points below to avoid a drastic loss.
- During recession periods, demand for financial services can decline, impacting the company’s profits.
- Any major financial crisis affecting a banking institution can lead to significant investor losses.
- New technologies introduced to financial services are key in determining the existing business value.
- Is it a wise decision to invest in individual finance stocks or in a finance ETF?
Individual finance stockers yield higher returns once the company is said to be performing well, yet the risk of investment is higher here. On the other hand, Exchange Traded Funds incorporate various assets like stocks, bonds, and commodities. Finance ETF investments can be a good foundation for new and experienced investors, given their lower risk involvement than individual stocks. Research the company’s financial statements, management system, business model, and industry trends to avoid unwanted losses before purchasing individual financial stocks.
- How safe is it for new investors to invest in finance stocks?
Financial stock investments are a good addition to a diversified portfolio. For new investors, considering finance stocks can be a wise decision if the investments are diversified. Look closely at your investment goals and risk tolerance before investing. Create a customised investment plan that meets your needs to stay safer, given the higher risk of investing in finance stocks.
