Financial Services Stocks in India

What are financial services stocks?

Financial services is one of the largest sectors on the Indian stock market. It covers banks (public sector, private sector and small finance banks), non-banking financial companies (NBFCs) and housing finance companies, life, general and health insurers, and capital market businesses - stock brokers, asset management companies, stock exchanges and depositories - along with fintech companies.

These businesses make money in different ways: banks and NBFCs earn the gap between the interest they charge on loans and the interest they pay on deposits and borrowings; insurers earn from premiums and from investing them; brokers and exchanges earn fees that grow with market activity. What they share is that they grow with the economy, credit and savings.

What moves financial services stocks

Interest rates

The Reserve Bank of India's policy rate decisions change what lenders earn and pay, and how much people borrow.

Credit growth

How fast loans are growing across the economy - to households, small businesses and companies.

Asset quality

When borrowers stop repaying, lenders have to set money aside as provisions, which hits profit. The level of bad loans is watched closely.

Regulation

Banks and NBFCs are regulated by the RBI, insurers by IRDAI, and brokers, exchanges and fund houses by SEBI. Rule changes can reshape profitability overnight.

Market activity

For brokers, exchanges and asset managers, trading volumes and the flow of money into mutual funds drive revenue.

What to check before investing in financial stocks

Net interest margin (NIM)

The difference between interest earned on loans and interest paid on deposits and borrowings, as a percentage of assets. Higher NIM means more profitable lending.

Gross and net NPA

Non-performing assets are loans on which repayments have stopped for 90 days or more. GNPA is the total; NNPA is what remains after provisions. Lower is better.

CASA ratio (for banks)

The share of deposits held in current and savings accounts, which pay little or no interest. A high CASA ratio gives a bank cheaper funds.

Return on assets (ROA) and return on equity (ROE)

Profit as a percentage of total assets and of shareholders' equity. Together they show how profitably a lender uses its balance sheet.

Capital adequacy

The capital a lender holds against its risk-weighted loans. Adequate capital lets it keep growing without raising fresh money that would dilute shareholders.

Price-to-book (P/B)

Lenders are usually valued on their book value (net worth) rather than earnings alone. P/B is the share price divided by book value per share.

Risks to know

A lender's biggest risk is borrowers who don't repay - a wave of bad loans can wipe out years of profit, as India's banks experienced in the late 2010s. Rapid loan growth in risky segments, dependence on short-term borrowing (for NBFCs), and regulatory changes are other risks. Capital market businesses are exposed to falls in trading activity when markets turn quiet.

How to invest in financial services stocks

1. 1

   Open a demat and trading account

   A demat account holds your shares electronically; a trading account lets you buy and sell them. With GoPocket you can open both online in a few minutes with your PAN, Aadhaar and bank details.

2. 2

   Add money

   Transfer funds to your trading account by UPI or net banking.

3. 3

   Research the company

   Pick a company from the list above and open its page to see its share price chart, financial performance and shareholding before you decide. Compare it with other financial services stocks on business quality, debt, growth and valuation.

4. 4

   Place your order

   Search for the stock in the GoPocket app or web platform, choose the quantity, and place a delivery order to hold the shares in your demat account. A limit order lets you set the most you are willing to pay.

5. 5

   Track and review

   Follow the company's quarterly results and news. Spreading your money across several companies and sectors reduces the damage if one investment goes wrong.

Terms used on this page

LTP

Last traded price - the price at which the stock last changed hands. The figure below it is the change from the previous day's close.

Market cap

Market capitalisation: share price multiplied by the number of shares issued. It measures a company's size in the market and is shown here in rupees crore (1 crore = 1,00,00,000).

Cap band

Whether a company is large, mid, small or micro cap, based on its market capitalisation. Larger companies tend to be less volatile.

Sector and industry

The NSE groups companies into broad sectors (such as Financial Services) and narrower industries within them (such as Banks), based on what they mainly do.

Trading graph

How the share price has moved during the latest trading session, from the 9:15 open to the 3:30 close. The dashed line is the previous day's closing price.