Top Growth Stocks Trading at a Discount
Best Mortgage Stocks in India 2023
Last Updated: 9th September 2023 - 11:48 am
Investing in the top mortgage stocks in India offers a compelling opportunity within a sector closely intertwined with the nation's real estate landscape. These stocks represent companies specializing in offering home loans, mortgage financing, and related financial services.
With India’s burgeoning middle-class population and the widespread aspiration for home ownership, the mortgage industry stands poised for substantial growth. Investors exploring this sector should meticulously evaluate factors such as the financial health of mortgage firms, their market positioning, and their adeptness in managing risks linked to the real estate market's cyclical nature.
Additionally, staying attuned to trends in interest rates and government policies pertaining to housing and mortgages is paramount for making astute investment decisions in this ever-evolving domain.
What are Mortgage Stocks?
Mortgage stocks encompass shares of companies engaged in various facets of the mortgage market, including mortgage lending, servicing and real estate investment trusts (REITs).
Mortgage lenders, for instance, profit from interest and fees associated with home loans, while mortgage servicing companies earn fees for managing administrative mortgage tasks.
Overview of Best Mortgage Stocks
LIC Housing Finance – One of the biggest companies in India in mortgage space after the merger of HDFC Bank and HDFC, LIC Housing Finance stock is near a 52-week high and also above its long-term average. The PE ratio is also attractive and the financials of the company have also been improving.
PNB Housing Finance – Another big company among mortgage stocks, PNB Housing Finance’s target price has received upgrades from some brokers in the recent past. The company has also reported a decrease in provisions in recent results and its stock is near a 52-week high.
Housing & Urban Development Corporation – The stock’s price is above long-term moving averages and near 52-week high, while RoCE has been improving in the last two years. It has seen highest recovery from a 52-week low.
Aptus Value Housing Finance – The company’s net cash flow has been improving for the last two years and the stock price is above long-term averages. It has been also lowered its provisions, getting an upgrade in its target price from brokers.
AAVAS Financiers – The company has shown high EPS growth, has been decreasing its debt and its revenue has been rising for past few quarters. Brokers have upgraded its stock price, in line with improvement in financial results.
Can Fin Homes – The stock’s price is above short-, medium- and long-term moving averages and has got upgrades from brokers following decrease in provisions. The company’s profit and margins have been improving and the stock has garnered interest from foreign investors, too.
Indiabulls Housing Finance – The stock has seen highest recovery from a 52-week low and still has low PE ratio, making its valuation attractive. The price is above short-, medium- and long term-moving averages and the company is making efforts to reduce its debt.
Home First Finance Company – This stock has also seen a positive breakout from first resistance with prices above long-term averages. The company has given high EPS growth and its return on equity, too, has been improving.
Repco Home Finance – The stock has seen positive breakout from first resistance and is above short-, medium- and long term-moving averages. The company has shown strong annual EPS growth and rising interest from FIIs and FPIs.
GIC Housing Finance – The company has been reducing its debt and the stock price is above long-term averages. RoCE, too, has been improving in the last two years, while valuations at attractive levels. However, high interest payment can mar its performance.
Performance of Top 10 Mortgage Stocks
Who Should Invest in Best Mortgage Stocks?
Investing in the top mortgage stocks is suitable for a range of investors including those who want to diversify their assets into long-term investments. While mortgage stocks are generally considered less volatile than some other equity investments, they are not entirely risk-free. Investors willing to accept moderate risk in pursuit of potential rewards may consider them.
Benefits of Investing in Best Mortgage Stocks
Investing in premier mortgage stocks provides a range of advantages for investors. These stocks are renowned for their consistent income streams, particularly among real estate investment trusts (REITs), which often distribute substantial dividends. Additionally, mortgage stocks offer portfolio diversification due to their low correlation with other asset classes, reducing overall investment risk.
Long-term growth potential of mortgage stocks aligns with the appreciation tendencies of the real estate market, making these stocks attractive to investors with extended investment horizons. For those interested in real estate but averse to direct property management, mortgage stocks offer exposure without the responsibilities of physical ownership.
These stocks also act as an effective hedge against inflation, as real estate values and rental income can rise alongside increasing living costs. Tax advantages, professional management, liquidity, transparency, diversified exposure, and low minimum investment requirements further enhance the appeal of mortgage stocks.
Things to Consider Before Investing in Best Mortgage Stocks
Like any other stocks, mortgage stocks too carry risks and benefits. Let us look at some of key things to consider before investing in top mortgage stocks:
Market Research: Thoroughly research the mortgage industry, including current trends, interest rate forecasts, and economic conditions. Understanding the broader market is crucial.
Company Selection: Carefully choose the mortgage companies you intend to invest in. Analyze their financial health, portfolio quality, and management expertise.
Interest Rate Environment: Be mindful of the prevailing and expected interest rate environment. Rising rates can negatively impact the value of mortgage-backed securities held by mortgage companies.
Risk Tolerance: Assess your risk tolerance. Mortgage stocks can be sensitive to economic fluctuations, so align your investments with your risk comfort level.
Diversification: Diversify your mortgage stock investments across various companies and sectors within the mortgage industry to spread risk.
Economic Indicators: Keep an eye on economic indicators GDP. These factors can influence the performance of mortgage stocks.
Regulatory Environment: Understand the regulatory landscape governing mortgages and real estate. Regulatory changes can impact mortgage companies' operations and profitability.
Earnings Stability: Evaluate the earnings stability of mortgage companies, particularly during economic downturns. Companies with resilient earnings may fare better in adverse conditions.
Monitoring: Continuously monitor your mortgage stock investments and stay updated on industry news and developments that could impact your portfolio.
How to Invest in Best Mortgage Stocks?
Step 1: Pick a strategy to invest in mortgage stocks.
Step 2: Filter a list of mortgage stocks that match with your strategy.
Step 3: Set the timeline for each investment.
Step 4: Keep track of your investment and adhere to an exit plan.
Conclusion
Mortgage stocks, or shares of housing finance companies, are generally considered less volatile than some other equity investments. Still, like all stock market investments, mortgage stocks also carry a certain amount of risk. Having said that, investors looking to diversify their holdings beyond pure-play banking or those looking to take an indirect exposure to the real estate sector can look at betting on the best mortgage stocks.
Frequently Asked Questions
Is it safe to invest in best mortgage stocks?
Is it worth investing in best mortgage stocks in 2023?
How much should I invest in mortgage stocks?
Trending on 5paisa
04
5paisa Research Team
Discover more of what matters to you.
Indian Stock Market Related Articles
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer please Click here.