Hot Chips - Stock Recommendations For Your Portfolio

CAN FIN HOMES | NSE CODE: 511196 | Volume: 11522 | CMP: Rs 178

With interest rates slated to come down, financial and banking companies are just waiting to take off. This is very true particularly of companies which are in the home finance segment. Many retail customers have been waiting in the wings to purchase house property. Even a slight reduction in interest rates will put the home loan market once again in the limelight. Companies with a focus on this segment are expected to do well going forward. And this is particularly true of companies like Can Fin Homes which has been aggressively expanding to spread its reach. Since March 2011, it has added 25 branches taking its total network to 66 branches. This means an additional 60 per cent branches in operation than what it had earlier. The branches of the company are strategically located outside cities and serve customers requiring smaller loans below Rs 10 lakh.

These loans are eligible for interest subvention. Further, the company gets refinancing from the National Housing Board at competitive rates due to lending in semi-urban and rural areas. These loans account for about 40 per cent of its loan book. The asset quality of the company is strong. Its gross NPAs were 0.9 per cent and its net NPAs were nil in FY2012. This is mainly due to the strict credit appraisals and efficient recoveries executed by the company. The CAR as of Q2FY2013 is 15.44 per cent against the minimum requirement of 12 per cent. One can look at the scrip from a medium term perspective.

IndusInd Bank | BSE CODE: 532187 | Volume: 66994 | CMP: Rs 435

The reason why we are recommending two stocks from the same sector but different sub-segments as Hot Chips this time is actually self explanatory. The banking sector is all set for a good year ahead thanks to the many developments surrounding it. With interest rates slated to come down and the economy in a take off mode, financials is one sector that will surely do well going forward.  IndusInd Bank has been an outperformer among private banking players. Over the past five years the bank under its stellar management has seen a very good growth. The bottomline grew from Rs 80 crore in FY08 to Rs 810 crore in FY12. Isn’t this is what you would really call growth? And mind you, this actually includes two years which were absolutely bad for business and the economy.

The asset quality of the bank continues to be robust. High focus is on the consumer lending on the asset side and improvement in liability franchisee has helped it build a strong balance sheet. Also the bank has a diversified loan book which is an added advantage. It plans to scale up its CASA from the present 28 per cent to 34 per cent over the next two years. This will help improve the profitability going forward. One can look at the scrip from a medium term perspective.