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What Are Bank Stocks?
Recently, banking sector share prices have seen huge fluctuations, mainly due to panic selling during the COVID-19 crisis, global crude oil shortage, and the ongoing Russia-Ukraine war. However, despite the market issues since 2020, bank stocks are a promising investment option, and experts suggest that these stocks will give high returns in the long term.
The Indian financial services and banking industry will see a major boost in the coming years. A huge chunk of the population that did not have a bank account or owned any financial product is now being introduced to banking. With rising digitisation and awareness, banking sector stocks can provide promising returns to investors, even among the poor and rural population. Financial analysts and rating agencies too indicate an opportunity to make profits in the coming days.
If you are looking to invest in the banking sector, here is a quick analysis of the financial industry in India and the best bank sector stocks that you can consider. Bank stocks are usually divided into two key categories - public sector banks (with 50% or more holding with state or central government) and private sector banks (majority stakes owned by private corporations or individuals). So let us understand the overall sector and the top banking sector share list in the public and private sectors.
Future of Bank Sector Stocks
The Indian banking sector covers a vast population, which 22 private sector banks serving, 12 public sector banks, 44 foreign institutes, 43 regional rural banks, 1484 urban cooperative banks, and 96000 rural cooperative banks. This vast number of financial institutions in the country cater to multiple groups, the urban class, small and medium-size industries, large institutions, the agricultural sector, and the rural population. In terms of total assets, public sector banks stood at INR 107.83 lakh crore (US$ 1.52 trillion) in FY20. Meanwhile, total assets of the overall banking sector (including public, private sector, and foreign banks) increased to US$ 2.52 trillion in FY20.
Investors should understand the features and financial products when investing in any bank stocks. With rising income, enhanced banking facilities even in rural areas, and growing digitisation, the banking sector is poised for growth in the coming years. As of August 2021, the total number of ATMs in India reached 213,570. Meanwhile, cashless transactions are also on the rise, with the Unified Payments Interface (UPI) recording 3.65 billion transactions worth INR 6.54 trillion (US$ 87.11 billion) as of September 2021.
Best Bank Sector Stocks for Long Term
Whether it is a public or private bank stock, investors need to properly analyse the offered products and the bank's overall financial health. Since banking is the backbone of India's sector, it is crucial to consider both public and private sector banks, which cater to unique segments and serve different economic purposes.
For the top banking sector share list in the private sector, the leading public sector bank shares have a high rating among analysts and have a strong market cap. Even in the private sector, the top-tier banks cater to a largely urban population, while the bottom-tier banks cater to rural and small-finance products.
Is It Worth Investing in Bank Stocks?
As can be seen, by the analysis of the banking sector and the top banking sector share list, Indian financial services are already in their growth stage, and the trends are looking promising for the future. The sector, both public and private sector banking, is evolving rapidly, thanks to digitisation and raising awareness about financial products.
Investors need to look at historical data and compare important financial details like total assets, NPA (Non-Performing Assets), and liquidity when investing in bank stock. It can also be tricky to understand the banking sector's share price just by the P/E ratio, so investors are recommended to do a detailed analysis before making any financial decision.
The banking sector stock list is also indexed under Bank Nifty, which will allow investors to spread their investments across multiple banks. This minimises the risk involved and provides investors and market intermediaries with a benchmark that captures the capital market performance of the Indian banking sector. So when adding a banking sector stock, think of all the available investment options and go for the ideal choice for your risk appetite!