Even as the equity benchmark Sensex has slipped about 2 per cent in the past five sessions, three index constituents from the BFSI sector -- Mahindra & Mahindra Ltd, Kotak Mahindra Bank Ltd and Bajaj Finance Ltd, hit their fresh 52-week highs during the same period.
In the case of M&M, analysts are positive but said the prevailing valuations undermine EV or hybrid risk for the car industry. They are positive on Kotak Mahindra Bank (KMB), but vary on Bajaj Finance's stock prospects, despite the latter's strong RoA and RoE profile and ability to grow across cycles.
On Tuesday, KMB shares hit a fresh high of Rs 1,969.90 on BSE today. M&M hit its one-year high of Rs 3,276.30 on Monday, while Bajaj Finance touched a 52-week high of Rs 8,655.20 on February 6.
Ventura Securities noted that since its initiating coverage on KMB in FY23, the stock has risen merely 3.7 per cent due to the RBI's diktat, barring the bank from onboarding new customers digitally and issuing new credit cards. Despite this and other asset quality challenges on the unsecured portfolio, Kotak has been able to grow its net advances by 10 per cent for the nine months ending December 2024, Ventura noted.
"We expect the strong trend to resume, given RBI’s recent liquidity boosting measures and eventual resolution with RBI (HDFC bank was able to resolve RBI strictures in 15 months," Ventura said last week, while suggesting a 24-month target price of Rs 2,648 on the stock.
The RBI has recent cut the repo rate by 25 basis points and analysts expect a gradual improvement in the NBFC sector operating performance from FY26 onwards. "While we believe that BAF will also benefit from the tailwinds in the sector, its valuation of 3.7 times FY27E P/BV and the imminent management transition lead us to retain our Neutral stance on Bajaj Finance," MOFSL said yesterday. Elara Securities suggested a 'Buy' and a target of Rs 2,100 on Bajaj Finance.
In the case of M&M, with forward PE valuation at +2SD above the mean level, Nuvama feels there is limited upside left. It suggested a target price Rs of 3,205 from Rs 2,915 earlier but maintain 'Hold' recommendation.
JM Financial, however, maintained 'Buy' on this stock as a ramp-up of recently added capacity and higher operating leverage is expected to support margin performance. YES Securities also sees M&M as 'attractive, despite recent outperformance.
"Driven by strong execution in autos and healthy outlook for farm segment, we maintain Buy with a March 2026 target of Rs 3,625 (SOTP valuation, 23x core business). Success of upcoming launches (EV and ICE) remains a key monitorable," JM said.