Time To Invest In Banking

The current period is an ideal situation for stock picking especially if you’re interested in investing with a long term view. The markets are in a state where their movements are ‘predicted’ or speculated upon by those who want to make money without investing too much. This has resulted in the market being largely bearish. Such a situation may interest one to invest in the banking sector.

The RBI has been given a clear objective .As the apex bank the current priority is to control rising inflation figures at any and all costs. The RBI has been doing so by constantly increasing its lending rates to other banks. Something no bank is happy with. Despite constant pleas from the banking sector, the RBI has stood firm and has adopted a strategy wherein it aims to stem inflation by wielding a tight credit policy.

The fact however does remain that the current inflation phenomenon is something we may never truly understand. The RBI’s current hope is to see inflation rolling back to single digit figures. Government sources have said that the projected plan is to bring inflation down to around 6% by the first quarter of the next calendar year.

Having a time frame like that is evident that we can expect the current recessionary state to prevail. The important detail in this situation is that we can’t truly expect the market to fully turn bullish though it has done so now and then the past few months, without an end to the subprime mortgage problem.

US banks are caught in a tussle to solve the credit crunch and inflation. Both of which require contradictory measures. The effect is seen else where throughout the world in addition to America.

Indian banks have been hit hard. In order to raise more money banks have been increasing their lending rates, an effect that directly impacts the customer. Loans are being carefully approved while FD rates have been increased in an effort to urge the investor to drop his money in banks.

Such an investment climate has left Indian Corporations in cold condition. This has resulted in banking stocks to tank big time. The Bankex index which tracks stocks in the Indian banking sector hit a 52 week low in the middle of last month reporting a drop of around seven thousand points from the high achieved just a few months earlier in January.

For the long term investor, this is an ideal time to steadily invest in the banking sector because when the economy gets back onto its feet and the stock market bulls charge, it is only a matter of time before these stocks start to deliver solid returns.

Shares of ICICI and SBI have taken a downturn, perhaps ideal for those who want to deal in them. Smaller banks like the Bank of India, Yes and Axis bank can be viewed as good prospects. While the Bankex has seen sharp rallies in the past few days, it should do little to dampen the spirits of the Long term investor who has always wanted a part of this sector.

For him, this is an excellent opportunity.