What is a credit boom and why does it matter for investors?

A credit boom refers to a period of significant growth in lending activity within an economy. In India's case, we're seeing loan growth of 10.3% and deposit growth of 10.4%. This matters for investors because when credit flows freely, businesses can expand operations, consumers can increase spending, and the overall economy tends to grow faster. Banks earn more through interest income, while companies that depend on borrowing can fund new projects. This creates investment opportunities across various sectors, from financial institutions to infrastructure and industrial companies.

What are NBFCs and how do they differ from traditional banks?

Non-Banking Financial Companies (NBFCs) are financial institutions that provide banking services but don't hold a banking license. Unlike traditional banks, NBFCs cannot accept demand deposits (like checking accounts) and don't participate in the payment system. They typically specialize in specific segments like consumer finance, vehicle loans, or small business lending. In India's credit boom, NBFCs like Bajaj Finance and Shriram Finance play important roles by serving market niches that traditional banks might underserve, making them important pieces of the overall credit ecosystem.

Why are infrastructure companies included in a credit boom theme?

Infrastructure companies are included because they're major borrowers and users of credit. Companies like Larsen & Toubro (LT.NS), Adani Ports, and GMR Infrastructure require substantial financing for their large-scale, long-term projects such as highways, ports, and airports. When credit is readily available at favorable terms, these companies can undertake more projects, expand faster, and potentially increase their profitability. In this way, they represent the "demand side" of the credit boom, complementing the banks and NBFCs that represent the "supply side."

What do "Projected Sales" and "Projected Profit" mean in the stock data?

Projected Sales refers to analysts' forecasts of a company's future revenue (total money earned from selling products or services) over a specific period, usually the next fiscal year. Projected Profit (also called projected earnings) is the estimated net income a company is expected to generate after subtracting all expenses from those sales. These forward-looking metrics help investors understand a company's growth potential and whether its current stock price might be justified by future performance. For companies benefiting from India's credit boom, strong projected figures may indicate that analysts expect them to successfully capitalize on the expanding financial environment.

What is "Dividend Yield" and why is it important?

Dividend yield is the annual dividend payment expressed as a percentage of the stock's current price. For example, if a stock pays ₹5 in annual dividends and trades at ₹100, it has a 5% dividend yield. This metric is important because it shows how much income you can expect to receive relative to your investment. Many established Indian banks and financial institutions pay regular dividends, providing investors with income in addition to potential stock price appreciation. A healthy dividend yield can be especially attractive in stable financial companies benefiting from the credit boom while possibly offering some downside protection during market volatility.

16 handpicked stocks

India's Credit Boom

India's financial sector is thriving with 10.3% loan growth and 10.4% deposit expansion. Our analysts have carefully selected the banks, financial companies, and industrial firms best positioned to benefit from this surge in credit availability and economic growth.

Han Tan | Market Analyst

Updated 2 days ago | Published at juin 30