Introduction:
India’s financial sector is increasing, with existing firms and new players entering the market. It includes commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds, and smaller financial entities.
Recently, the banking regulator has allowed new entities like payment banks to expand the range of players in the sector. Out of all these forms of companies, the banking sector dominates the finance sector, with commercial banks holding more than 64% of the total assets in the financial system.
The finance sector is set to snowball by 2035 due to rising incomes, the government’s push for financial inclusion, and digital or fintech adoption. Due to this, finance stocks are being considered by stock advisory companies and wealth management companies alike. The growing NIFTY Financial Services index can also show growth prospects.
The Nifty Financial Services Index tracks the performance of India’s financial market. It includes 20 finance stocks list on the National Stock Exchange (NSE). The index is calculated using the free float market capitalization method, meaning it reflects the total market value of all the stocks in the index compared to a base market capitalization value. Investing in the index’s top finance stocks is a hard-to-miss opportunity to invest in the country’s growing finance sector.
As of 18th November 2024, the index’s 1-year growth rate was 18.94%, slightly more than NIFTY50’s growth rate of 18.86%. Since its inception in 2011, the index clocked a growth of 16.44% as of 31st October 2024. As of the same date, the top 10 finance stocks list included in the index are as follows-
| Company | CMP Rs. | Mar Cap Rs.Cr. | Div Yld % | 1Yr return % | Net worth Rs.Cr. | Net Profit (FY24) Rs.Cr. |
| HDFC Bank | 1,705.10 | 1303196.75 | 1.14 | 13.28 | 456395.25 | 71546.36 |
| ICICI Bank | 1,253.45 | 884329.75 | 0.8 | 36.03 | 256143.84 | 50084 |
| Axis Bank | 1,126.20 | 348456.12 | 0.09 | 13.91 | 157023.52 | 28052.36 |
| SBI | 814.3 | 726731.81 | 1.68 | 44.44 | 414939.17 | 74460.58 |
| Kotak Mah. Bank | 1,722.75 | 342510.98 | 0.12 | -2.7 | 129971.69 | 22094.19 |
| Bajaj Finance | 6,567.95 | 406553.79 | 0.55 | -7.08 | 86802.86 | 15389.2 |
| Bajaj Finserv | 1616.00 | 2,54,970.97 | 0.06 | -1.36 | 60329 | 1731 |
| Shriram Finance Ltd | 2848.15 | 1,06,525.24 | 1.57 | 42.02 | 52392 | 7190 |
| HDFC Life Insurance Company Ltd | 690.50 | 1,46,157.59 | 0.29 | 4.39 | 15,601 | 8240.8 |
| SBI Life Insurance Company Ltd. | 1562.20 | 1,51,991.86 | 0.18 | 7.71 | 14906 | 1894 |
Overview of the Top Finance Stocks in India:
HDFC Bank Limited:
| NSE Symbol | P/E | Industry P/E | CASA Ratio | ROCE |
| HDFCBANK | 18.26 | 10.85 | 38.2% | 7.67 |
Source: Screener and NSE as of 18th November 2024
HDFC Bank Limited, headquartered in Mumbai, is India’s largest private sector bank by assets and ranks as the world’s tenth-largest bank by market capitalization as of May 2024. It holds a significant 15% market share in the banking sector’s advances and 37% in private sector banks’ advances. Recognized as one of India’s three systemically important banks, it is among the top three government banks for collecting direct and indirect taxes.
The bank leads in almost every asset category and operates through 8,738 branches across metro, urban, semi-urban, and rural areas. Its global presence includes offices and branches in Bahrain, Hong Kong, the UAE, and Kenya. HDFC Bank has five subsidiaries:
- HDB Financial Services
- HDFC Life Insurance
- HDFC Asset Management Company
- HDFC ERGO General Insurance
- HDFC Securities.
For FY2024, the bank’s balance sheet reached Rs.36,17,623 crore, a 46.7% rise. Deposits grew by 26.4% to Rs.23,79,786 crore, and advances increased by 55.2% to Rs.24,84,862 crore. The capital adequacy ratio (CAR) was 18.8%.
Source: Annual Report
ICICI Bank:
| NSE Symbol | P/E | Industry P/E | CASA Ratio | ROCE |
| ICICIBANK | 17.87 | 10.85 | 40.4% | 7.60 |
Source: Screener and NSE as of 18th November 2024
ICICI Bank is India’s second-largest private sector bank, offering a wide range of financial products and services to retail, SME, and corporate customers. It has an extensive network of 6,523 branches, 17,190 ATMs, and 570 Insta Banking Kiosks nationwide. ICICI is also active in life and general insurance, housing finance, and other financial services through its subsidiaries and associates.
The Bank provides digital solutions for cash management, trade, supply chain finance, and employee benefits across sectors like real estate, healthcare, FMCG, and hospitality. Its efforts to simplify banking are showing results. iLens, its end-to-end digital lending platform, streamlines the loan lifecycle. iMobile Pay, the mobile banking app, has over 30 million users. InstaBIZ, a one-stop solution for business banking, recorded a 22% growth in transaction volume in FY2024.
As of FY2024, the Bank reported a net interest margin of 4.53%, deposits of Rs.14,12,825 crore, and advances of Rs.11,84,406 crore. Its capital adequacy ratio was 16.33%, with a net NPA of just 0.4%. ICICI Bank continues to strengthen its position as a leader in the financial sector.
Source: Annual Report
Axis Bank:
| NSE Symbol | P/E | Industry P/E | CASA Ratio | ROCE |
| AXISBANK | 12.46 | 10.85 | 42.54% | 7.06 |
Source: Screener and NSE as of 18th November 2024
Established in December 1993, Axis Bank Limited is a leading private-sector bank in India. It has the third-largest branch network among private banks, a global presence with branches in DIFC (Dubai) and Singapore, representative offices in Abu Dhabi, Sharjah, Dhaka, and Dubai, and an offshore banking unit in GIFT City.
Initially known as UTI Bank Ltd., it started operations in April 1994 under RBI’s 1993 guidelines for private sector banks. Today, Axis Bank ranks as India’s third-largest private bank and fourth-largest credit card issuer, with a 19.8% market share in FY24. It operates 5,377 branches across India and boasts three decades of excellence.
The bank issued India’s first ESG-compliant Sustainable AT1 Bond in 2022 and acquired Citibank India’s Consumer Business in 2023. As of FY2024, deposits grew 13% to Rs.10,68,641 crore, with CASA deposits rising by 3% and improved average Liquidity Coverage Ratio (LCR). Advances reached Rs.9,65,068 crore, and the Net Interest Margin (NIM) stood at 4.07%, with a net NPA of 0.31%. Additionally, its flagship digital platforms, ‘open’ and ‘NEO,’ continue to dominate retail and wholesale banking.
Source: Annual Report
State Bank of India:
| NSE Symbol | P/E | Industry P/E | CASA Ratio | ROCE |
| SBIN | 9.30 | 10.85 | 41.11% | 6.16 |
Source: Screener and NSE as of 18th November 2024
State Bank of India (SBI), a Fortune 500 company, is India’s largest and oldest bank, with over 200 years of history. Headquartered in Mumbai, this Indian multinational public sector bank plays a vital role in the nation’s financial ecosystem. SBI holds a 63% market share in Central Government Business and operates 241 overseas offices across 29 countries, ensuring a global reach. It also has partnerships with 45 exchange houses and five banks in the Middle East to facilitate inward remittances to India.
The bank focuses on expanding its branch network and ATMs, especially in rural areas, to ensure better accessibility. SBI has introduced innovative deposit schemes like the SBI Green Rupee Term Deposit for green initiatives, SBI We Care for senior citizens, and Sarvottam Term Deposits.
As of FY2024, SBI manages total assets worth Rs.61,79,694 crore, with deposits of Rs.49,16,077 crore (11.13% growth) and advances of Rs.37,67,535 crore (15.24% growth). It also commands a 26.81% market share in mobile banking transactions.
Source: Annual Report
Kotak Mahindra Bank:
| NSE Symbol | P/E | Industry P/E | CASA Ratio | ROCE |
| HDFCBANK | 18.05 | 10.85 | 45.50 | 7.86 |
Source: Screener and NSE as of 18th November 2024
Established in 1985, Kotak is one of India’s top financial services groups. It offers a variety of financial solutions across the country and abroad and operates internationally through subsidiaries and branches in key locations.
Kotak Mahindra Bank provides services like retail banking, treasury, corporate banking, investment banking, stockbroking, vehicle finance, asset management, insurance, and advisory services. As of FY2024, it ranks 4th in market share for deposits and gross advances. Its securities broking business holds an 11.8% share, while its asset management arm commands a 6.5% share.
The bank manages assets worth Rs.7,67,667 crore, with AUM at Rs.5,60,140 crore, total deposits at Rs.4,45,269 crore, and advances at Rs.4,30,352 crore. It has 1,948 domestic branches and international operations, including a unit at GIFT City, a branch at Dubai’s DIFC, and offices in New York, London, Mauritius, Dubai, Singapore, and Abu Dhabi.
Are Finance Stocks Worth Considering In Today’s Market?
The future of finance stocks looks bright, driven by digital transformation, financial inclusion, and economic growth. Technology in banking, insurance, and investments is boosting efficiency and customer experience. Innovations like digital payments, online lending, and robo-advisors are creating new revenue streams.
Government efforts like the Pradhan Mantri Jan Dhan Yojana and digital banking initiatives further support growth. With economic expansion, the demand for credit, investments, and insurance is set to rise. However, factors like regulatory changes, interest rate shifts, and fintech competition will influence outcomes. Companies leveraging tech and adapting to trends may lead this growth.
So, before finalizing an investment decision in consultation with a SEBI-registered financial advisory, here are a few factors to consider-
- Interest rates directly affect banks and financial institutions. Higher rates improve net interest margins, while lower rates can reduce margins but increase loan demand.
- The finance sector is closely tied to economic cycles. In growth periods, lending, investment, and consumer spending increase, benefiting financial companies. Economic slowdowns can lead to higher defaults and lower credit demand.
- Government policies, banking regulations, and financial reforms impact operations, profitability, and compliance costs for financial institutions.
- High non-performing assets (NPAs) can hurt profitability and investor confidence. Strong asset quality is essential for stable growth.
- Technological disruption, especially fintech and digital banking, is reshaping the industry. Companies that innovate and adapt quickly gain a competitive edge.
- Consumer confidence is vital. Scandals or financial instability can erode trust in financial institutions and result in a loss of investor confidence.
- Financial companies need adequate capital reserves and liquidity ratios to navigate economic downturns and meet regulatory requirements.
Bottomline:
India’s finance sector presents significant investment opportunities driven by digital innovation and growing consumer demand. Using a stocks screener can help identify top-performing finance stocks like HDFC Bank, ICICI Bank, and SBI, which are poised for growth. While the sector holds promise, staying updated on market trends and regulatory changes is essential to know whether the investment and the time of investment both align with your objectives and portfolio.
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Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
FAQ
What are the benefits of investing in finance stocks?
The financial sector is key to the economy, and top companies here can bring steady profits. This sector thrives on economic growth, changes in interest rates, and the constant demand for financial services across industries.
Who all should invest in finance stocks?
Investors interested in the financial sector and its long-term growth should consider finance stocks. But, before investing, assess a company’s financial health, risk management, revenue diversity, and ability to adapt to regulatory changes and technology.
Is it important to focus on diversification when investing in finance sector stocks?
Yes, it is. Diversification helps reduce risks from market cycles, interest rate changes, and regulatory shifts. By spreading investments across sub-sectors like banking, insurance, and fintech, you can balance potential losses and seize growth opportunities in different areas of finance.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.
