How to Select Investing Opportunities – Part 2

On that decisive note, from our last talk, we now have to “stalk” the sectors and stocks that could be our first pickings. The sheer size of the debt market is promising, especially with the strong arm of government regulation we can rest assured interest rates will stay and will remain the trend, for now. This is definitely a strong shot in the arm for gift funds. 

Debt Market

The next move would be to identify the companies with high growth potential and narrow in on the NCDs of those companies, for relative safety as opposed to the rest. That process requires enumerating the triple A-rated, assessing the issuers, the rating agency, the yield and tradability. Also hand-picking good PSUs and identifying potential in the growing sectors, listing credit ratings of those companies, and for now staying averse to trading markets for foreign exchange and bullion.

Right at the top of the heap we are looking at the financial sector, with insurance and AMC at the top followed by NBFCs, HFCs and microfinance institutions. The last three being intermediaries work on interest income, and are in hot water for two reasons one the assets that they have bought into have crashed and two the loans that have been given are under credit risk now.

Banking sector

Despite the liquidity that banks have, the defaults that are happening make it a struggle, which is obviously not going to see a fix overnight and a reasonable strategy, would be to not desert microfinance. Cooperative banks with too much political say and clout can remain untouched, for now. Bank CRR has been cut and well capitalized well and looks good, albeit no takers. So till bank lending issues are not resolved we can still see issues with NBFCs, HFCs and microfinance institutions. 

Despite the liquidity that banks have, the defaults that are happening make it a struggle, which is obviously not going to see a fix overnight and a reasonable strategy, would be to not desert microfinance. Cooperative banks with too much political say and clout can remain untouched, for now. Bank CRR has been cut and well capitalized well and looks good, albeit no takers. So till bank lending issues are not resolved we can still see issues with NBFCs, HFCs and microfinance institutions. 

The ideal picture

For us the ideal scenario would demand the easing if not eliminating funding issues by the government in the sector. Also assuaging concerns over where the money would come from, and further concerns whether the LIC, insurance company’s rigid IRDA governance getting in the way. And finally were the source of the money only banks more specifically PSU banks which would be great and not so great would be this credit flow going mainly into the small scale industries.

You can access the Video Clip of this coverage here ; where Rohini Raina, Managing Partner at Finogent Advisory has provided an overview of the same.