Bullish On India's Banking Sector

Includes: HDB, IBN
by: Himanshu Pandya

Wall Street Journal is out with a bullish article on the Indian Banking sector (sub. req.).

Following are the key points from the article:

  • Indian Banks have minimal exposure to subprime debt.
  • The recent curbs by the government on overseas funding will drive growth in the current fiscal year.
  • “With companies forced to seek more funding at home, banks will be able to keep interest rates firm and improve asset quality by booking more blue-chip corporate loans — allaying worries about an upturn in bad consumer loans.”
  • Analysts and fund manager believe Indian Banks could see 20% upside in the next 12 months.
  • Indian companies can only borrow up to $20 million from the overseas markets in one financial year. Also, they will need permission from the Central Bank and show they require funds for expenditure needs.
  • ICICI Bank (NYSE:IBN) was mentioned as a pick by one of the analysts.

I have been recommending both US listed Indian Banks, ICICI Bank (IBN) and HDFC Bank (NYSE:HDB) for a long time and see no reason to stop now. These should be part of your key long term holdings and provide international exposure to your portfolio. They key right now is to find a good entry point with the way the market is acting right now. Any major downside should be considered an opportunity to start building a position small portions at a time. I myself plan to do the same.

Disclosure: no position in HDB or IBN.