Amid a 5 per cent drop in Sensex in the first two months of 2025, an index constituent has bucked the weak stock market trend and rallied 24 per cent year-to-date, adding Rs 1.04 lakh crore to its market capitalisation.
The NBFC stock, which hit a 52-week high of Rs 8,655.20 on February 2, last quoted at Rs 8,492.40, up 24.49 per cent over Rs 6,821.40 level at the end of 2024. It commanded a m-cap of Rs 5,27,252 crore at last count against 4,22,906 crore at end-2024, making it the ninth most-valued stock on BSE. This is Bajaj Finance Ltd.
In a note on NBFCs, Kotak Institutional Equities said while investors remained anxious about the asset-quality outlook, NBFCs seem to be in better command. This brokerage has maintained its 'Add' on Bajaj Finance, suggesting a fair value of Rs 8,500 on the stock.
InCred Equities said the recent cut in the repo rate will ease the overall cost of funds further for most NBFCs as banks are bound to cut interest rates for loans which are linked to benchmarks. It said most NBFCs have the discretion to manage rates with an added advantage of a higher share of the fixed-rate loan book. This will ensure superior margin profile for most NBFCs, the brokerage said.
"We believe that lenders with a strong track record and robust asset quality management will continue to depict strong AUM growth. Bajaj Finance (BAF) continues to be an outlier, which has maintained a healthy growth momentum. We expect BAF (ADD; Rs9,750) to remain an outlier on growth and profitability fronts even during the current volatility," the brokerage said.
Among Sensex stocks, Bajaj Finserv Ltd is not far behind Bajaj Finance, as it is up almost 20 per cent. "Our preference is for superior quality NBFCs - Bajaj Finance and Shriram Finance – high conviction ADD-rated stocks. We remain cautious on CIFC," InCred said.
On NBFCs, Nomura India said the concerns on asset quality are largely factored in, though some additional disappointment can't be ruled out in H1CY25. This brokerage expects the outlook for NBFCs to improve in H2CY25 with clean-up being largely done in H1 in stressed segments.
"Further, policy rate cuts will have a positive impact on growth as well as return ratios. We are positive on players which are a play on old vehicles/MSME/LAP segments. We think the valuations are not excessive and have corrected from the peak," the brokerage said. It has Bajaj Finance among its preferred picks.