Betting on a bank licence may backfire in NBFC space


NBFC stocks are in focus as some investors are showing renewed interest in them in the hope that they or their parent company would get a banking licence soon.NBFC stocks are in focus as some investors are showing renewed interest in them in the hope that they or their parent company would get a banking licence soon. 

NBFC stocks are in focus as some investors are showing renewed interest in them in the hope that they or their parent company would get a banking licence soon. For example, Shriram Transport, LIC Housing Finance %, L&T Finance, IDFC, among others, have seen some buying interest from investors. However, investment experts say the bank licence is a one-off event, which could only have a shortterm impact on the prices of these stocks. They warn investors against buying stock merely based on this event as it can backfire badly.

One, the stocks may erase gains if the company or parent is denied a banking licence. Two, setting up a bank and running it profitably brings its own set of challenges. “The going will be tough for new banking licence aspirants, as there is some saturation in urban markets and they have lost out on the first move advantage,” says Adarsh Parasrampuria, banking analyst, Prabhudas Lilladher. 

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SOURCE: http://economictimes.indiatimes.com/

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