D. Muthukrishnan Believes Banking Sector Stocks Are 'Riskiest To Own': Here's Why

While bank stocks are often viewed as excellent long-term investment opportunities, value investor D. Muthukrishnan believes that “lending business” stocks are the “riskiest to own” due to their fragility.

What Happened? The certified financial planner (CFP) referring to HDFC Bank’s recent woes tweeted that even though he’s seen great returns from the bank’s stock over the past decade, the risk involved in owning a “lending business” stock is very high.

Lending business stocks are often recession-prone, run a loan loss risk and are sensitive to interest rate fluctuations — making them often risky options to hold long-term.

That said, per stock analysis platform Tickertape, India’s banking sector has fared well over the course of the economic recovery phase post-Covid 19. The sector has demonstrated strength, with rising credit growth and much more robust balance sheets.

Read next: D. Muthukrishnan Reminds Investors That Equity Returns Are Always Non-Linear: ‘Stay Invested’

According to annual stock price charts, the country’s PSU banking space has rallied somewhere between 65 and 75% on a year-on-year level, with many smaller PSU banks giving more than 100% returns over the last year.

HDFC hasn’t been having the best of weeks: That said HDFC Bank, particularly, hasn’t had a great run over the past month losing 4.5% in stock value. The bank’s stock was affected by a report that stated that the personal information of over 6 lakh customers have been exposed on the dark web.

HDFC Bank has since, vehemently denied the report stating, “We wish to stress that there is no data leak at HDFC Bank and our systems have not been infiltrated or accessed in any unauthorised manner. We continue to have faith in our systems.”

Price Action: HDFC Bank shares were trading 2.63% lower at ₹1,588.65 on Friday at market close.

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Posted In: D. MuthukrishnanHDFC BankIndian Banking SectorPSU banks