LIC Housing Finance - Up Up And Away - 8/30/2016
Housing is a very basing need and first sign of independence and prosperity. With uplifting of Indian middleclass, this particular segment of the economy is going to keep on booming for next few decades. Also as people seek for better opportunities they migrate to the cities and they are going to need a shelter there. Well, there are innumerable things one can mention about haphazard urban development in India. Issue becomes even worse when you combine it with pathetic planning. But hey, we are going to draw a line here and not going to dwell on any other issues except 'Trading' :) , because we are just here to trade and make money.
So why one should own housing finance stocks?
Other than the reason we mentioned above regarding the need of constant supply of new housing, one important aspect of owing housing finance stocks is that your investment is much safer ! ( of course you need to pick a value here too ) But imagine lending money to the person who is putting his assets as collateral. Now what if the assent is double or even more in value than what you are lending. Besides there is very liquid market and huge potential of property appreciation. Then that lending is not at much risk right?!
In India, person buys a house worth 1 crore but does the registration of just 50 lakhs or less to avoid tax and stamp duty and other charges. Now he gets the loan of 30 lakhs on that house ! So now you can understand how juicy this market is ! If the borrower defaults the bank can make, double of what they have landed by liquidating the asset. We would love to be a housing lender in this country because most of the time, no risk and more reward. In contrast to other banks financing industrial projects, this is much safer ( check out the NPA figure of these big banks and check how much it consists of housing loans ;) most probably none to very negligible)
Now looking at LIC Housing Finance Stock ( LICHSGFIN ), a break out after a year of consolidation between 400 and 500 is looking good. Of course one needs to be vigilant about general mood of the market in face of Fed hiking bias. But still taking a long trade near break out level makes sense. Then if you get a good entry and stocks keep on flying then there is no need to abandon it.
So why one should own housing finance stocks?
Other than the reason we mentioned above regarding the need of constant supply of new housing, one important aspect of owing housing finance stocks is that your investment is much safer ! ( of course you need to pick a value here too ) But imagine lending money to the person who is putting his assets as collateral. Now what if the assent is double or even more in value than what you are lending. Besides there is very liquid market and huge potential of property appreciation. Then that lending is not at much risk right?!
In India, person buys a house worth 1 crore but does the registration of just 50 lakhs or less to avoid tax and stamp duty and other charges. Now he gets the loan of 30 lakhs on that house ! So now you can understand how juicy this market is ! If the borrower defaults the bank can make, double of what they have landed by liquidating the asset. We would love to be a housing lender in this country because most of the time, no risk and more reward. In contrast to other banks financing industrial projects, this is much safer ( check out the NPA figure of these big banks and check how much it consists of housing loans ;) most probably none to very negligible)
Now looking at LIC Housing Finance Stock ( LICHSGFIN ), a break out after a year of consolidation between 400 and 500 is looking good. Of course one needs to be vigilant about general mood of the market in face of Fed hiking bias. But still taking a long trade near break out level makes sense. Then if you get a good entry and stocks keep on flying then there is no need to abandon it.
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