The sector index has risen 18 per cent in the last year and 1 per cent this year so far against a 29 per cent and 4.7 per cent rise in the benchmark Nifty, respectively.
But, in the last 2 months, the NBFC stocks witnessed a recovery with the Nifty Fin Services jumping 3.5 percent so far in April and 2.8 percent in March. In comparison, the Nifty rose 1.9 percent in April so far and 1.5 percent in March.
Following the general rally in the Indian market, the Nifty Fin index also touched a new high of 21,758.35 on April 9, 2024.
However, the largest NBFC stock in the index Bajaj Finance did not follow the same path.
BAF has been flat in April so far, down 0.2 percent. Overall in 2024 YTD, the stock shed 1.4 percent, giving negative returns in 3 of the 4 months. Apart from April, the share decreased by 5.4 percent in February and 6.3 percent in January. However, it grew 11.5 percent in March.
Meanwhile, in the last 1 year, the stock has gained over 23 percent, outperforming Nifty Fin.
Currently trading at ₹7,229.10, the writing is almost 12 percent away from its record high of ₹8,192.00, hit on October 6, 2023. But, it recovered 25 percent from its 52-week low of ₹5,780, hit on April 12, 2023.
Meanwhile, over the long term, shares of Bajaj Finance have delivered over 4000 percent returns to their shareholders in the last 10 years.
Revenues of the fourth of December
In the December quarter, Bajaj Finance posted a 22.40 percent year-on-year (YoY) increase in its consolidated net profit at ₹3,638.95 crore in return ₹2,973 crore in the same period last fiscal. Meanwhile, its income from operations during the quarter under review grew 31.28 percent to ₹14,161.09 crores against ₹10,787.25 crore in the corresponding period last year.
The NBFC’s assets under management (AUM) jumped 35 percent to ₹3,10,968 crores on December 31, 2023 from ₹2,30,842 crore in Q3FY23. Meanwhile, its net interest income rose 29 percent in the quarter reviewed to ₹7,655 crore as compared to ₹5,922 crore in the same period last year.
The lender’s asset quality also improved in Q3FY24 with its gross NPA (non-performing asset) and net NPA at 0.95 percent and 0.37 percent, respectively. Its GNPA and NNPA were 1.14 percent and 0.41 percent in the corresponding period last fiscal.
Despite such a stellar long-term return, the stock has been underperforming in recent times. Will its performance improve? Here’s what technical and fundamental experts are saying:
Technical view
Om Mehra, Technical Analyst, SAMCO Securities
After a significant rise in the recent past, Bajaj Finance’s share price currently remains in a consolidation phase. When we look at the weekly chart, the main trend is still bullish. On a daily time frame, the Relative Strength Index (RSI) consistently shows values above 65, signifying continued strength.
The stock is currently trading above its 20-day and 50-day moving averages. The daily chart shows that the stock is on the verge of a potential breakout. It is noteworthy that the NBFC sector, to which Bajaj Finance belongs, has also shown bullish momentum, which could help the stock perform even better. Bajaj Finance remained resilient, holding strong above the key level of ₹7,100. Investors may consider accumulating the shares in stages for a long-term investment horizon.
Rohan Shah – Technical Analyst, Religare Broking Ltd
Bajaj Finance rebounded strongly after completing the bullish harmonic pattern around 6200 levels. The increase in price is well supported by volumes that highlight buying interest at high levels. However, after the recent rally, the stock is seen digesting its gains and consolidating in a narrow range with relatively lower volumes, highlighting a lack of selling pressure. Thus, we believe that a break above 7400 would propel the next leg of the upward move to 7700 and 7900 levels. On the upside, support is seen at 7130, followed by 7050 levels.
Gaurav Bissa, VP, InCred Equities
Bajaj Finance witnessed a strong rebound from its horizontal channel support. however, the structure remains range-bound with the possibility of increased volatility ahead. in the absence of triggers, it is advised to avoid Bajaj Finance soon.
Rajesh Palviya, SVP – Technical and Derivatives Research, Axis Securities
Since May 2021, the stock has broadly consolidated within 8100-5500 levels, indicating a major long-term sideways trend. However, on the short-term chart, the stock witnessed a sharp rebound from the lower support zone of 6180-6200 levels. This indicates a bullish short-term trend. The positive crossover of 20 and 50-day SMA reconfirms a short-term trend reversal. Currently, the stock is hovering around its 200-day SMA (7252). Therefore, any sustained upward move above the same may cause further momentum towards 7800-8000 levels. On the other hand, the 100-day SMA support at 7037 levels provides a good demand zone. The weekly and monthly strength indicator RSI continues to remain positive, indicating continued and growing strength.
The short to medium term perspective stands bullish; therefore, traders and investors are advised to hold the stock with the expected top of 7800-8000-8100 levels in coming months.
Read here: After 3 straight months of decline, B&K sees 40% upside in Hindustan Foods
Fundamental view
ICICI Securities: The brokerage initiated its coverage on the stock with a ‘BUY’ rating and a target price of ₹8,500, which implies an increase of 17.5 percent.
ICICI observed that Bajaj Finance stands out among Indian NBFCs by emphasizing customer ‘ownership’ rather than just ‘lending’. The company’s distinctive business model focuses on offering financial solutions to India’s growing aspirational middle class. This approach is expected to drive Bajaj’s assets under management (AUM) and return on equity (RoE) to exceed 25 percent growth in the near future.
The company has the lowest cost of delivery among NBFCs, which is backed by a strong cross-sell/upsell engine and robust digital infrastructure – arm in arm, these form the basis of Bajaj’s leadership now and also going forward in the NBFC space. , it added.
The brokerage believes that adapting to the ever-changing market needs has been one of Bajaj’s strongest points. It also observed that despite attempts by several players to establish themselves in the high-yield unsecured lending sector, most have struggled to expand their operations. However, Bajaj Finance has managed to succeed where others have faltered.
Anand Rathi: The brokerage reiterated a ‘Buy’ rating on Bajaj Finance with a target price of ₹8,630 per share, which implies over 19 percent.
Bajaj Finance’s share price has seen a decent correction from its record high and is at an attractive entry point, brokerage firm Anand Rathi said, adding that the company’s premium valuation has come down over the past two years. It noted that at the current market price, the stock trades at 3.5x FY26e Book Value and 18x FY26 PE, with a regulatory surplus priced at this point. The stock has traded at higher valuations in the past.
“Bajaj Finance is on track to achieve its medium-term goals and gain market share, with high growth, deepening product penetration and unmatched execution capabilities. Despite competition from other large corporate-backed NBFCs, we consider the company to be one of the fastest growing .-growing proxies for the Indian premium issue,” it stated.
It further emphasized that the company’s loan growth premium to peers is likely to be high. This, and deep knowledge of technology and product, makes the brokerage believe it is the best franchisee to play the Indian premium theme. It estimates around 26.6 percent loan CAGR over FY24-26 and 4.5 percent RoA.
Disclaimer: The opinions and recommendations made above are those of individual analysts or trading companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 12 Apr 2024, 19:03 IST