Stock Shastra

The Banking sector in India remains an investment favourite for most of us. This is but natural, given its excellent performance in the past decade. But, when it comes to understanding the structure, we find it too complicated! Most of us even shy away from it.

MoneyWorks4me thus brings to you a simple analysis of the Indian Banking Industry in two parts.

This first article will help you learn the structure of the Banking Industry and what is its business model?

MAGFIL, a Kerala based NBFC, derives its maximum revenue from loans against Gold. It has a strong presence in South India with 76% of its branches situated in this region. This region currently accounts for 40% of India’s gold demand and 85-90% of the gold loans market in India.
In the last ten years, the company has shown phenomenal performance in all its financials. The company follows a robust risk management policy of granting gold loans only against household used jewellery. However, it still has a modest market share of 7% Compared to this, Muthoot Finance, the market leader has a with 20% market share
At the back of all these factors does MAGFIL provide a golden investment opportunity?

Back in the 1980s people got an impressive return of over 12% on their deposits. The equation was simple: “Paanch saal mein paise double”. However, times have changed today. Now, the interest rate stands at a miserly 8% compared to the 12% seen earlier.
Our economy has evolved a lot since those days; we are currently one of the fastest growing economies in the world. But the earlier time seemed so much better as you got higher returns! So, what is the real deal? Was the high interest rate in 1980s a better situation than today? What is the relation between the growth of an economy and interest rates? How does the interest rate affect the stock markets? And above all what should your action plan be considering the impact of interest rate on stocks?