Best Financial Stocks In India

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In this article, we will discuss

• An Overview of the Indian Financial Sector
• The Best Financial Stocks in India in 2024
• Things to Keep in Mind Before Investing in Financial Stocks
• Conclusion

If you are interested in creating wealth over the long term, investing in stocks in the financial sector is something you must consider. The Indian financial sector is one of the largest sectors in the economy and comprises a broad spectrum of industries. These include banking, asset management, and financial services, among others.

The financial sector has time and again displayed incredible resilience and robust growth. One of the many reasons for this is the ever-increasing demand for financial products and services. In this article, we are going to look at a brief overview of the sector as a whole, including the top financial stocks you can consider including in your portfolio.

An Overview of the Indian Financial Sector

India has one of the most diversified financial sectors in the world. Apart from traditional financial service providers, the sector also has new entities like payment banks. However, despite the existence of a wide range of entities, the banking industry dominates the space, controlling more than 64% of the total assets in the entire sector.

In the financial technology (fintech) space, India is among the fastest-growing markets, with the total market size expected to be $150 billion by the year 2025. Currently, more than 2,100 fintech entities are operating in the country.

Several of the industries in the Indian financial sector have been steadily showing growth. The insurance industry, for instance, is expected to grow to $1 trillion by 2025. The mutual fund industry, on the other hand, has grown from $110.63 billion in 2014 to $658.72 billion in 2024.

With efforts being made to bring insurance, investment and credit facilities to rural areas of the country, penetration in these areas is likely to pick up in the next few years. This could potentially lead to multi-fold growth in the sector in the future. By investing in some of the top financial stocks, you can effectively capitalise on the sector’s vibrant future growth potential.

The Best Financial Stocks in India in 2024

The table below outlines some of the best financial stocks you can consider investing in, along with some of their key financial metrics.

Note: All of the values in the table are valid as of June 17, 2024.

With the list of the top financial shares out of the way, let us now explore each of these companies in more detail.

• HDFC Bank Limited

The largest private-sector bank in India, HDFC Bank Limited, provides a wide range of banking and financial services for both the corporate and retail segments. In addition to banking services, HDFC Bank Limited also has a credit card arm with a plethora of offerings catering to all kinds of users.

A strong focus on retail banking, an extensive digital presence, and a vast network of branches and ATMs are some of the major advantages of the bank. As of May 2024, the bank has a total of over 8,700 branches and more than 21,000 ATMs and cash recycler machines across 3,836 cities and towns in India.

• ICICI Bank Limited

ICICI Bank Limited is another one of the top 5 financial stocks you must invest in. A leader among the private sector banks, the company has made significant strides in the Indian banking sector. The bank's comprehensive suite of products and services, including retail banking, corporate banking, and treasury operations, caters to a diverse customer base.

ICICI Bank was one of the first banking institutions in India to adopt digital technologies and offer its banking services through the internet. In addition to internet banking, the bank also offers its services through other digital channels, such as a smartphone application and even WhatsApp.

• State Bank of India Limited

The State Bank of India Limited is one of the oldest banking institutions in India. It is also the largest public-sector bank in the country. With a vast network of branches and ATMs across the country, SBI plays a crucial role in financial inclusion by serving the banking needs of both the urban and rural populace, including the unserved and underserved segments.

The State Bank of India’s extensive reach and unwavering focus on improving asset quality and profitability make it an attractive investment option in the financial sector. In addition to a comprehensive network of over 22,500 branches, SBI also has a significant off-shore presence with about 241 offices across 29 different foreign countries.

• Bajaj Finance Limited

Bajaj Finance Limited, one of the leading non-banking financial companies (NBFCs) in India, is in the business of lending and deposit-taking. The company’s lending portfolio can be categorised into three primary verticals: retail, commercial, and small and medium enterprises (SMEs). One of the major advantages that Bajaj Finance has over other competitors is its significant presence in both rural and urban regions of India.

Bajaj Finance Limited is also very highly rated by various Indian credit rating agencies. The company’s long-term borrowing products are rated AAA/Stable, whereas its short-term borrowing products are rated A1+ by CRISIL. ICRA rates Bajaj Finance Limited’s fixed deposit program as AAA (Stable), making it one of the safest investment options for retail investors.

• Axis Bank Limited

Another one of the top 5 financial stocks you should consider investing in, Axis Bank Limited also offers a plethora of financial services to retail and corporate customers. The bank also has a strong credit card arm that offers standalone and co-branded cards with an attractive reward points program.

Additionally, Axis Bank is among the few institutions in India to offer a comprehensive suite of banking services to non-resident Indians (NRIs). The bank's emphasis on customer-centric initiatives, digital banking, and innovative product offerings makes it a good contender to benefit from the increasing demand for financial services in India.

• Jio Financial Services Limited

Originally a subsidiary of Reliance Industries Limited, Jio Financial Services Limited was spun off as an independent entity in 2023. The stock was subsequently listed on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) in August 2023.

Despite being a relatively new company, Jio Financial Services is well-poised to revolutionise the Indian financial sector with attractive offerings across multiple segments, ranging from UPI payments and insurance to digital banking and even mutual funds.

Jio Financial Services' strong focus on digital solutions and strategic partnerships could potentially help the company capitalise on the growing demand for digital financial services in India.

• Power Finance Corporation Limited

Power Finance Corporation Limited (PFC) is a leading financial institution in India. The company’s primary business is providing financial assistance to the various entities operating within the power sector. Some of the products that PFC offers include project finance, corporate finance, and debt refinancing.

In addition to supporting traditional (fossil-fuel) power generation, Power Finance Corporation Limited has also diversified into the renewable energy space. The company currently offers a wide range of financial products and services to the solar and wind energy production industries. Against the backdrop of the ever-increasing energy needs of the nation, the company's role in financing critical power infrastructure projects makes it a very attractive long-term investment option.

• Bank of Baroda Limited

Bank of Baroda Limited is currently the second-largest public-sector banking institution in India. The bank is widely known for its strong presence in both domestic and international markets. In fact, Bank of Baroda’s international banking solutions are widely regarded as one of the best among Indian public sector banks. In addition to banking services, Bank of Baroda also offers several mutual fund schemes in association with BNP Paribas.

Bank of Baroda's strategic initiatives, digital transformation, branch rationalisation, operational efficiency improvements, and the mergers of Vijaya Bank and Dena Bank have significantly strengthened its financial performance. If you wish to invest in banking shares, Bank of Baroda Limited could be an option you can consider.

• SBI Cards and Payment Services Limited

A subsidiary of the State Bank of India, SBI Cards and Payment Services Limited is among the largest credit card issuers in the country. The company is also the first full-fledged credit card issuer to be listed on the Indian exchanges. SBI Card offers a wide range of credit cards tailored to different segments, including lifestyle, luxury, travel, shopping, and corporate cards.

SBI Card's strong market presence, extensive distribution network, and focus on customer-centric initiatives are some of the many factors that have contributed to its impressive growth. Furthermore, the company’s ability to leverage SBI's vast customer base and cross-sell products makes it an attractive investment opportunity.

• BSE Limited

The Bombay Stock Exchange (BSE) is Asia’s oldest stock exchange and the second-largest in India. In addition to offering a platform for the trading and exchange of various financial securities, the BSE’s business verticals also include clearing and settlement, market data services, and index services.

The BSE has consistently focused on technological innovation and expanding its product offerings. Considering that the Bombay Stock Exchange is currently the only listed stock exchange in India, investing in the company could enable you to capitalise on the growing demand for market-linked investment options.

Things to Keep in Mind Before Investing in Financial Stocks

Investing in financial stocks can be very rewarding. However, you must ensure that you consider a few factors before you take the plunge. Here are some crucial aspects you need to keep in mind when investing in stocks in the financial sector.

• Overall Market and Economic Conditions

The performance of the entire financial sector is heavily dependent on the prevailing market and economic conditions. Interest rates, inflation, and economic growth are some of the crucial factors that can significantly impact the sector. Therefore, it is crucial to monitor and stay informed of macroeconomic trends when investing in financial stocks.

• Fundamentals

Thoroughly examining the fundamentals of a stock is crucial before investing. Fundamental analysis can help you determine whether a stock is valued higher than its intrinsic value (overvalued) or lower compared to its intrinsic value (undervalued). Undervalued stocks generally have strong future growth potential, whereas overvalued stocks generally tend to go through corrective phases.

When examining the fundamentals of a stock, remember to focus on the financial statements, the business model, management quality, growth prospects, and corporate governance. Also, consider comparing the key financial metrics of the stocks with those of their peers and the industry average to get deeper insights.

• Regulatory Environment

The financial sector is heavily regulated by statutory bodies, such as the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). Any changes in the regulations laid out by these statutory bodies could have a major impact on financial stocks. As an investor, you must stay updated on regulatory developments and understand how they might affect the companies you're interested in.

Conclusion

With the penetration of financial services all set to increase in the coming years, the future of the Indian financial sector looks promising. Investing in financial stocks could potentially enable you to capitalise on the numerous growth opportunities that the sector has to offer.

That said, before you buy shares online, you must ensure that you open a demat account. Samco Securities offers one of the best trading and demat accounts in India, with a wide range of benefits such as zero account opening fees and annual maintenance charges (AMC) for the first year. Additionally, you also get access to advanced trading features worth Rs. 12,000 per year for free.

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