HDFC

HDFC is an ideal play on the gamut of financial services. Besides market dominance in housing finance, it provides huge potential for value unlocking from its investment in banking, insurance and mutual fund subsidiaries. 

The proposed UTI Mutual Fund IPO, stake sale by Reliance Capital in its mutual fund entity and the probability of listing of insurance companies though in the long term, should provide triggers. Moreover, there is a possibility of a merger with HDFC Bank. 

Its core business--housing finance will continue to do well. Its loan book is expected to witness a CAGR of 25 per cent over the next two years. Its net interest margins are expected to remain stable at around 3 per cent. 

And, HDFC is known for its asset quality. HDFC's stock trades at about 5 times FY09 estimated book value (adjusted for the value of its subsidiaries, which is about 30 per cent of HDFC's market capitalisation), and is a worthy pick.