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Bajaj Finance shares surged by up to 2.9% on Thursday, reaching Rs 8,736 on the BSE, as the broader financial sector gained
Bajaj Finance
Bajaj Finance shares surged by up to 2.9% on Thursday, reaching Rs 8,736 on the BSE, as the broader financial sector gained following the Reserve Bank of India’s (RBI) rollback of stricter risk weight norms for bank loans to non-banking financial companies (NBFCs).
The RBI’s decision to lower the risk weight from 125% to 100%, effective April 1, is expected to enhance credit flow to NBFCs. This reverses a November 2023 measure that had increased capital requirements for banks lending to the sector, which had previously restricted credit availability.
The rise in Bajaj Finance’s stock reflected broader strength in the financial sector, with Bandhan Bank gaining 7.8% to Rs 145.8, and IndusInd Bank increasing by 1.7% to Rs 1,062.05.
Brokerages have welcomed the RBI’s move. Nuvama described it as part of the central bank’s ongoing “easing spree,” noting that the RBI also reduced the risk weights for microfinance institution (MFI) business loans from 125% to 75% and granted new branch expansion approvals for Muthoot Finance.
Nomura, in its commentary, stated that the relaxation would improve credit flow from banks to NBFCs, while also boosting capital ratios. Lenders such as State Bank of India, Federal Bank, and Bank of Baroda, which have high exposure to NBFCs, stand to benefit. The brokerage estimates that core equity tier-1 (CET-1) ratios could increase by 39-74 basis points for these banks.
However, analysts cautioned that while the RBI’s easing measures should help NBFCs, banks may still remain selective in lending to mid-sized players due to sector-specific risks. Nomura also highlighted that while regulatory relief is positive, microfinance loan growth may take some time to recover due to ongoing challenges in that segment.
With the RBI adopting a more accommodative approach, market participants expect further regulatory adjustments aimed at striking a balance between maintaining financial stability and fostering credit growth.
“Bajaj Finance is bullish but may be overbought on daily charts, with the next resistance at Rs 8,877. Investors should consider booking profits at current levels, as a daily close below the support level of Rs 8,590 could lead to a downward target of Rs 8,127,” said Sebi-registered research analyst AR Ramachandran.
The stock is trading higher than its 5-day, 10-day, 20-day, 30-day, 50-day, 100-day, 150-day, and 200-day simple moving averages (SMAs), and its 14-day relative strength index (RSI) stands at 72.46. An RSI above 70 indicates that the stock is overbought. Bajaj Finance has a price-to-equity (P/E) ratio of 32.60 and a price-to-book (P/B) ratio of 6.64, with earnings per share (EPS) at 260.47 and a return on equity (RoE) of 20.35.
