We analyse 4 NBFC stocks to back in a volatile market
Highlights:
- Funding crunch and slow auto sales impacting sentiment
- Larger NBFCs to capture market share from smaller ones
- Healthy Q2 performance – AUM, NIM and asset quality
- M&M Finance our top pick with diversified asset and liability
- Sundaram Finance, conservative and diversified financial service play offers value.
Asset financing companies have had a rough ride at the markets with a negative return in the past one year. But in this period business performance has improved as borne out by the quarterly earnings report. The funding crunch and the negative sentiment towards all NBFCs also impacted investor interest. While the funding constraint appears to be easing, their core market of commercial vehicle is slowing down. In light of these several cross currents, is it worth looking at asset financing NBFCs?
The funding scenario
While there is an overall risk aversion towards NBFCs, especially from mutual funds who had been a big source of funding for NBFCs post demonetisation, that tap is drying up. Large NBFCs, especially the ones promoted by reputed corporate houses, will continue to find favour with mutual funds.
In addition, most of the larger NBFCs have a diversified funding sources with little reliance on the Commercial Paper (CP) market.
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