What portion of your salary should you spend on loan EMIs?
Most people buy a house or a car by taking a loan from the bank, but do you know what is the maximum portion of your salary that you should spend on EMI? What is the 40 percent EMI rule? What are the disadvantages of spending more on EMIs? Among home loan, personal loan, auto loan and credit card bills, which loan should you eliminate first?
Foreign portfolio investors have maintained their bullish sentiment in Indian stocks this month. Remaining net buyers for the second straight month in 2023, FPIs purchased equities worth Rs 5,711 crores in April. In March, this figure stood at Rs 1,997.7 crores. Notably, BFSI and auto stocks have featured high on the FPI radar.
The total weightage of BFSI stocks touched a 26-month high, making up around 32.4% in their portfolio. Per NSDL data, FPIs have made net investments worth Rs 38,287 crores in Indian markets, as of 16th May, 2023.
The sectors leading the momentum are financial services, oil and consumable fuels, FMCG and more. One of the main reasons why the BFSI sector is attracting attention is due to India’s credit growth touching a 11-year high. With a 15% Y-o-Y increase, credit disbursal touched Rs 136.8 lakh crore as of March 24, 2023.
Top 5 Indian sectors in FPI portfolio (as on April, 30, 2023)
Sector Assets under custody (Rs cr)
Automobile and components 2,74,544
Financial services 16,19,066
FMCG 3,44,222
IT 4,62,588
Oil & Gas 4,70,812
Souce : NSDL
What should investors do?
Should retail investors follow suit and increase their portfolio’s allocation to the BFSI sector? Viral Bhatt, who heads Mumbai-based personal finance advisory MoneyMantra thinks affirmatively.
“The Indian economy is expected to grow at a healthy pace in 2023-24, which will boost demand for banking and financial services. Moreover, rising interest rates and massive digital transformation will help banks to improve their net interest margins, which will boost their profitability”.
However, it would not be wise to look over the risks involved. “Retail investors should invest in BFSI stocks for wealth creation in the long run and not for short-term profits. They need to be careful in stock selection and avoid being greedy since volatility and regular course-correction is a feature of the market. It’s always favorable to avoid lump sum and prefer staggered investments” says Snajeev Dawar, a Pune-based financial planner.