The Non-Banking Financial Companies (NBFC) sector is set for continued strong performance through the remainder of fiscal year 2027, according to an optimistic outlook from SBI Securities. Despite a significant rally in both earnings and stock prices, the investment firm believes the sector's growth trajectory is far from exhausted.
Strong Credit Growth Fuels Optimism
Sunny Agarwal, DVP and Head of Fundamental Desk at SBI Securities, emphasizes that NBFCs are well-positioned to deliver "healthy growth" in the coming period. This positive outlook is primarily driven by companies projecting credit book or advances growth ranging from 15-25 percent, depending on their individual scale and business mix. This strong guidance aligns with broader market trends, where financial institutions have consistently shown robust quarterly results.
"Buy on Dips" Strategy Endorsed
Agarwal's market call for the NBFC segment is clear: "NBFC should continue to deliver a healthy set of number. And I think any dip is a buying opportunity." This recommendation suggests that even after recent gains, the sector's earnings visibility remains strong, provided loan growth continues and funding conditions remain supportive. Investors should monitor how balance-sheet expansion translates into stable or improved net interest margins, as borrowing costs significantly influence profitability.
Key Stock Picks and Triggers
Among the preferred stocks, Shriram Finance is highlighted due to a specific funding catalyst. Agarwal notes that a substantial fund infusion from a Japanese conglomerate could reduce its borrowing costs, potentially expanding net interest margins and boosting earnings. He maintains a "buy on dip strategy" for Shriram Finance.
Bajaj Finance is another top recommendation, following what SBI Securities described as "very solid set of numbers." While the stock has already seen considerable movement, the advice is to accumulate it during corrections rather than chasing upward momentum. Additionally, smaller NBFCs such as Mahindra & Mahindra Financial Services and Northern ARC Capital Ltd. are also viewed constructively by SBI Securities.