JM Financial Backs Nine NBFCs to Outperform During Monetary Tightening As the Reserve Bank of India continues its monetary tightening policy, JM Financial has pinpointed...
As the Reserve Bank of India continues its monetary tightening policy, JM Financial has pinpointed nine Non-Banking Financial Companies (NBFCs) that it believes are well-equipped to navigate the challenging interest rate environment. The brokerage remains constructive on the sector, singling out firms with specific fundamental strengths that position them for continued growth.
The selection criteria focus on two critical attributes for lenders in a rising-rate climate: a robust liability franchise and significant pricing power. Companies with diverse and stable funding sources are better insulated from liquidity shocks. Furthermore, the ability to pass on increased borrowing costs to customers is essential for protecting profitability. JM Financial's analysis suggests that firms possessing these qualities can maintain or even improve their margins.
JM Financial’s recommended list spans various segments of the financial market. The top picks include vehicle financiers like Shriram Transport Finance (TP ₹1,550), Cholamandalam Investment and Finance (TP ₹840), and Mahindra & M Financial Services (TP ₹240). In the microfinance space, CreditAccess Grameen (TP ₹1,270) and Spandana Sphoorty Financial (TP ₹710) were highlighted. Other notable names are consumer finance giant Bajaj Finance (TP ₹8,270), SBI Cards and Payment Services (TP ₹1,030), MAS Financial Services (TP ₹940), and Home First Finance Company (TP ₹930).
Despite the headwinds from rate hikes, the brokerage anticipates stable to improving Net Interest Margins (NIMs) and Return on Assets (RoA) for these selected companies. This optimistic forecast is rooted in their expected ability to effectively manage costs while sustaining growth in their assets under management (AUM). The analysis indicates that well-managed asset quality will further support their financial performance through the policy cycle, distinguishing them from more vulnerable peers in the sector.
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