Shares of Bajaj Finance Ltd fell for the fifth consecutive session today, leaving investors jittery in a volatile market. The Bajaj Finance stock, which closed at Rs 6,136.20 on March 6 fell to an intraday low of Rs 5,720 in the current trading session, translating into a loss of 6.78% or Rs 416 during the period.
With the ongoing correction, market cap of Bajaj Finance has slipped by Rs 24,443 crore to Rs 3,47,060 crore today against the market cap of Rs 3,71,503 crore on March 6 this year. In the afternoon session, the stock was trading 1.90% lower at Rs 5733 on BSE. It fell 2.2% intraday to Rs 5720 against the previous close of Rs 5844.25. Later, the stock ended 1.91% lower at Rs 5732.45 on BSE.
Total 0.81 lakh shares of the firm changed hands amounting to a turnover of Rs 46.76 crore on BSE. Market cap of the NBFC fell to Rs 3.47 lakh crore.
Bajaj Finance’s relative strength index (RSI) stands at 33.2 which signals the stock is neither oversold nor overbought. A level below 30 is defined as oversold while a value above 70 is considered overbought. Bajaj Finance stock has a one-year beta of 1.3, indicating very high volatility during the period. Bajaj Finance shares are trading lower than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages.
Shares of Bajaj Finance hit a 52-week high of Rs 7777 on September 22, 2022. On the other hand, Bajaj Finance stock hit a 52 week low of Rs 5,235.60 on June 17, 2022.
Here’s a look at what analysts and brokerages said on the ongoing correction in Bajaj Finance and whether the stock is headed toward Rs 5,500 level.
Abhijeet from Tips2trade said, “Bajaj Finance looks bearish but also in oversold zone on the Daily charts. Rs 5545-5650 will be a strong support zone for long-term buyers. Strong resistance will be at Rs 6000.”
On the other hand, Rahul Malani, Analyst Banking & NBFC, Fundamental Research, Sharekhan by BNP Paribas is bullish on the NBFC stock. He listed out the reasons of underperformance in the Bajaj Finance stock.
1. AUM growth is tapering off due to size and higher competition in consumer & other retail loans.
2. Rising share of mortgage would lead to dilution of ROA/ ROE profile.
3. Growth differentials have also narrowed due to faster loan growth acceleration taking place at banks and other NBFCs due to strong sector tailwinds, which is leading to valuation derating.
4. Challenges in faster retail liabilities growth as there is no access to low cost CASA deposits.
5. Additional rate hikes going forward may affect margins negatively as company may not be able to pass additional rate hikes due to steep interest rate hike in the last 10 months.
On the outlook of the large cap stock, Malani said, “Currently, it trades at 6x 1 year forward book value. In the near term, valuations fully reflect the superior franchise growth. However, as far as medium to long-term investment thesis is concerned, we continue to like the franchise built around strong competitive moats, which is difficult to replicate along with strong execution capabilities, underwriting, data analytics and we believe BAF is poised to deliver strong sector-leading ROA/ ROE of 4.7%/ 4.8% 22%/23% in FY24E/FY25E. We remain upbeat about strong earnings growth and longevity of the franchise going forward. We have a buy rating on the stock with target price of Rs 7500.”
On March 9, Ambit Capital initiated coverage on Bajaj Finance with a ‘Sell’ rating and a 12-month target of Rs 5,028. Bajaj Finance’s one-year forward valuation implies 25 per cent asset under management (AUM) growth, with 20 per cent return on equity (RoE) over the next decade, Ambit Capital said.
Despite superior technology, analytics, processes and distribution, it’s a tall task, Ambit Capital said adding that no Indian lender has grown at over 20 per cent for two decades.
Ambit Capital said Bajaj Finance is the most expensive lender in India, trading at a significant premium over housing finance companies, NBFCs and large-cap private banks. Consistent high growth has led to the stock re-rating over the years.
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