The banking sector continued to lead as best performer with a year-to-date (YTD) return of 71.13 per cent which has outperformed the NSE All Share Index of 43.02 per cent YTD return which made this sector more predictable and stable and for investors that desire consistent dividend, banking stocks has always been a good choice .
APT Securities research noted that even while the economy was faced with recession in 2016, banking stocks still posted impressive results and declared significant dividend and through this, the banking sector has been able to beat expectations as it is generally believed that banking stocks move alongside with the economy.
“It will definitely not be a bad advice for value investors to take position in banking sector as there is strong indication that the economy is set for a major boom in the coming year, 2018 and obviously there is no reason to doubt a strong year end, 2017 earnings based on the nine months performance so far, and given the state of the economy which has seen the MPC deploy tools to support currency and manage inflation/interest rates, supporting betterment of ease of doing business in the country.
“So, rather than losing sleep over these banking stocks as regards their loan quality, spread between interest rate and funding costs, operating efficiency, and so on. Everything boils down to return on equity which measures an investor’s investment growth, that is, how well your money has been utilised for profitability. And if this is high, it implies there is enough capital for business expansion or to deploy through dividend,” it said.
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