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Economic Times
2 days ago
- Business
- Economic Times
Time for NBFC stocks to shine again? Policy support, repo rate cuts to benefit these 4 banking stocks
iStock NBFC stocks are expected to perform well in the upcoming quarter, bolstered by RBI rate cut and policy support for NBFC-MFIs Non-banking finance companies (NBFCs) have faced multiple challenges over the past few quarters amid delinquencies in unsecured loans, tight liquidity, and rigorous scrutiny by the Reserve Bank of India (RBI). However, their performance is expected to improve after cuts in interest rates and phased reduction in the cash reserve ratio (CRR) that will lead to an increase in liquidity and boost credit growth. The relaxation of regulations for NBFCs focused on gold loans and microfinance institutions (MFIs) will also help. Performance concerns were reflected in the share prices of NBFC companies in the first five months of 2025. The group of 104 listed companies in the financial services and consumer finance space, with a market cap of more than Rs.100 crore, delivered an equal weighted average return of -4.5% between 1 January and 31 May 2025. In comparison, the Nifty 500 equal-weighted index delivered -1.5% during the same period. Policy support The repo rate has been cut by 1 percentage point this year—25 basis points each in February and April, and 50 basis points in June. The CRR is being lowered by 100 basis points in four steps between September and November, a move that will lead to an infusion of an estimated Rs.2.5 lakh crore liquidity into the banking system. This, in turn, is expected to boost the net interest margins (NIMs) of increased liquidity and lower rates will support NIMs by reducing the cost of funds (CoF). The NIM is the difference between the interest income generated from lending activities and that paid on borrowed funds.'While the policy action is positive for the entire NBFC space, the players with high fixed rate assets (vehicle loans, loans against property) stand to benefit the most,' stated a recent ICICI Securities report. It expects the CoF to improve by 20-40 basis points in 2025-26 for most relaxation on new gold loans will be effective from April 2026. The loan-to-value (LTV) ceiling is being raised from 75% to 85% for loans with ticket sizes of less than Rs.2.5 lakh. This means that the gold loan focused NBFCs can lend more for every Rs.100 worth of gold. This will make the borrowings attractive and support the loan book the second key relaxation, the central bank dropped the qualifying assets threshold from 85% to 60% for NBFC-MFIs. This is the minimum amount of eligible microfinance loans that NBFC-MFIs must hold on their books, allowing them to diversify into more profitable segments, such as affordable housing or consumer finance.'With the qualifying asset threshold lowered, MFIs now have the flexibility to diversify their loan books, moving beyond traditional group lending to slightly larger ticket sizes. This will help stabilise the earnings across credit cycles,' said Harshal Dasani, Business Head, INVasset, Emkay report has stated that the NBFCs are set for risk-calibrated, profitable growth, aided by the reduction in cost of funding and easing of stress in some segments. Though the report expects a lacklustre performance in the June quarter, meaningful gains are expected from the second half of the current financial year and in 2026-27. Repo rate cuts spell bonanza for NBFC stocks Lower cost of funds will improve NIMs. The sentiment for the NBFC sector has improved since the policy measures were announced on 6 June. The group of 104 companies has generated an equal-weighted average return of 3.6% between 5 June and 1 July, compared with the Nifty 500 equal weighted index's 2.1% measures could result in a re-rating of NBFC stocks over the next three to six months, led by an improved margin outlook, stronger balance sheets and higher loan growth visibility, said Manish Goel, Founder and Managing Director, Equentis Wealth Advisory are the four NBFC stocks with broad analyst coverage and a significant buy rating. Stock price returns What do the analysts say? Aditya Birla Capital The firm reported a steady performance across business segments in the March 2025 quarter, with 6% year-on-year growth in net profit. It reported a strong loan growth in both NBFC lending and housing finance— 20% and 69% year-on-year, respectively. While the former was driven by SME and corporate loans, strong disbursements aided the latter. Health insurance, life insurance and asset management also performed well. The management expects margins to improve in the future, helped by a fall in the cost of funds and a gradual increase in the share of unsecured loans in its loan mix. The modifications in the strategy for customer selection in the unsecured segment will support disbursements in consumer and personal loans. A Motilal Oswal report estimated a consolidated return on equity (RoE) of 14% by 2026-27. Aptus Value Housing Finance The company reported a strong performance in the March quarter, with 26% and 25% growth in net profit and AUM, respectively, on a year-on-year basis. While volume growth supported the AUM, the assignment transaction of Rs.75 crore boosted the net profit. The company enjoys a strong capital adequacy ratio of 70%, which has helped it to report robust return ratios. Moreover, its steady cost-to-income ratio makes it a cost-efficient affordable housing finance lender. Strong asset quality, steady credit costs and likely revival in disbursements in 2025-26 are some of the key positives. Moreover, focus on increasing floating rate borrowings, to benefit from the ratecycle reversal, and a high share of fixed rate loans will improve spreads and profitability in the future. The management expects the AUM to reach Rs.25,000 crore by 2027-28, implying a 32% CAGR. An ICICI Securities report expects that the growth momentum will sustain due to the stringent credit monitoring, strong collection mechanism, focus on geographical diversification and controlled opex. PNB Housing Finance The NBFC reported a steady performance in the March quarter, with 25.3% year-on-year growth in net profit. An uptick in high-yielding segments, provision write-backs and efficient asset liability management supported the performance. To enhance growth, the company's management is focusing on affordable housing and emerging market segments. On the other hand, the company is slowing down disbursements in the prime segment due to the increased competition from large banks. Affordable housing and emerging market segments currently constitute 24% of the loan book and the management plans to scale up such segments to 40% by 2026-27. The increase in scale will impart efficiency gains by reducing opex and will lead to an improvement in return on assets (RoA). With 70% of borrowings on floating rate, the rate cut will prove favourable by lowering the borrowing costs. A recent Nirmal Bang report remains positive on the company due to its improved growth prospects, with expansion in emerging markets and affordable segments, along with the improving return ratios due to the likely NIMs expansion and benign credit costs. Shriram Finance It reported a subdued performance in the March quarter due to a spike in credit costs and contraction in NIMs. Tepid demand amid weak government capex and minor deterioration in asset quality weighed on its performance. Going forward, the margins are expected to improve, helped by an improved product mix, rate cut, and expectations of a higher government capex. Moreover, the asset quality is expected to stabilise in the second half of the current financial year. A recent Motilal Oswal report is bullish on Shriram Finance due to its market leadership, strategic diversification in high-growth, non-auto segments, potential for margin and operating efficiency improvements, attractive valuations and strong earnings visibility.
Time of India
3 days ago
- Business
- Time of India
Earn above Rs 12 lakh? Here's how you can make your retirement plan tax-efficient
Long-term capital gains from stocks and equity-oriented funds are now taxed at 12.5%. But there is a Rs 1.25 lakh tax-free threshold that can help small investors avoid the tax. (AI image) Saving for retirement used to be easy. But in the past few years, there have been several amendments in tax rules for retirement products. Many instruments are now in the tax net. At the same time, individuals earning up to Rs 12 lakh a year will pay no tax under the new regime, which is a massive relief for millions of taxpayers. If your income is more than Rs 12 lakh a year, here's how you can make your nest egg tax efficient. Stocks and equity funds: Long-term capital gains from stocks and equity-oriented funds are now taxed at 12.5%. But there is a Rs 1.25 lakh tax-free threshold that can help small investors avoid the tax. They should harvest long-term gains of up to Rs 1.25 lakh every year by booking profits, and then buying back the same stocks or mutual funds. Also Read | ITR filing FY 2024-25: Top 8 mistakes first-time tax filers make; how to avoid them in AY 2025–26 Ulips: Maturity proceeds of Ulips are taxable if the combined premium of policies bought after 1 February 2021 exceeds Rs.2.5 lakh. To avoid the tax, restrict investments in Ulips to Rs.2.5 lakh in a year. If you need to invest more for retirement, use mutual funds or the NPS to fatten your nest egg. NPS investments can also help you save more tax. Traditional insurance policies: The maturity proceeds of life insurance plans have also been made taxable if the total premium of policies bought after 31 March 2023 is over Rs 5 lakh. Don't put more than Rs 5 lakh in traditional insurance plans. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Prepárate para replantearte todo en lo que crees Movistar Plus Mirar Ahora Undo Use debt funds and the NPS if you need to invest more. Debt funds: There is now no distinction between long-term and short-term gains from debt funds. These funds are also no longer eligible for the indexation benefit. All gains will be added to income and taxed at slab rates. Even so, debt funds help defer tax because the gains are taxed only when you redeem. Keep investing in debt funds and redeem after retirement when your income and tax liability will be lower. Also Read | ITR filing FY 2024-25: Why filing Income Tax Return is important even if you have no tax to pay - explained Provident Fund: The Provident Fund has always been seen as a tax-free haven. But three years ago, the interest earned on contributions to the Employees' Provident Fund beyond Rs 2.5 lakh in a year were made taxable. To get past this, restrict contributions to Rs 2.5 lakh a year. Investors who want to put in more should open a PPF account, if they don't already have one. They can also go for debt funds to defer tax. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Time of India
23-06-2025
- Business
- Time of India
Nifty 25K under fire: Aamar Deo's strategy for BEML, Adani Power and 4 others stocks amidst Mideast war
Live Events Markets have displayed strong resilience and a bullish momentum in the past week, with the benchmark indices closing strongly in the green. Overall, the rally has been broad-based with positive gains witnessed in midcap and smallcap as well, clearly indicating investor interest. And all this, despite the rising geo-political tensions in the Middle East. Further the India VIX , too continues to trade within a comfortable band of 14-16, further cementing the comfort of the investor community. But given the latest developments of USA directly entering into the war with Iran, and bombing its key nuclear facilities, could have graver ramifications asIran threatens to block the Strait of Hormuz, which accounts for almost 20% of the daily world crude oil consumption. This could lead to a further spike in crude oil prices, and we could witness volatile trading sessions this week. Investors need to brace themselves for increased volatility, while at the same time, stay Nifty has been in a consolidation mode, for the past few weeks, with strong support seen around the 24,400-24,600 zone whereas immediate resistance on the upside is seen around the 25,200-25,400 zone. Bank Nifty on the other hand, has displayed a stronger move as compared to Nifty, on the back of a sharp rally in Financials. Bank Nifty has crucial support around the 55,200-55,400 zone whereas resistance is seen around the 56,700-57,000 of the IT stocks witnessed positive moves last week, with gains ranging from 1%-3% WoW, with the exception of TCS , LtMindTree & Oracle which ended marginally in the benchmark Nifty IT Index is up 4.5% MoM, indicating that overall investor interest remains strong in this sector. However, it would be prudent to go slow and steady in the sector, given the mixed economic trends emerging from the USA, which accounts for a major chunk of the IT business of Indian IT companies.A limited exposure should be maintained in the IT sector, given the headwinds in the industry, while at the same time, the emerging opportunities emerging in this sector, offers scope for capital appreciation. But primarily, the gainers will be those who shall be able to leverage the emerging technologies and service their clients most competitively. Hence, an ideal mix of a Tier1 & a Tier2 stock can be looked at from a long-term investment the financial sector has performed exceedingly well in the current quarter, and with the recent RBI rate cut of 50 basis points and a 100-basis cut in CRR, spread over 4 tranches starting September till November, is likely to infuse Rs.2.5 trillion into the banking system by year this clearly indicates, that going forward, that credit growth shall be a key theme. Given such optimism in this sector, it is very likely that FIIs have begun buying into the sector, and this sector could see solid double digit growth in coming years. As far as the energy sector is concerned, there are too many variables at play, both in the domestic and global scenario, hence it would be advisable to adopt a cautious renewables space is something that can be looked at from a long-term and smallcaps have indeed delivered superior returns over the past month, as compared to large caps, on the back of the expectations that many stocks in these categories are likely to report better financial numbers in the coming quarters. Earlier, during the sharp correction post September, many of these stocks had witnessed significant erosion in value, which led investors to dump these stocks. But over the past couple of months, interest in back in these two categories, but it has become more stock and sector strong on fundamentals shall continue to do well, and it would be prudent to stay invested in the leaders in these two market witnessed a sharp rally last week, and few stocks such as Swiggy, Aditya Birla Capital and BEML gained almost 10%, 8% and 8% respectively WoW. Investors can look at holding these stocks from a long-term perspective, as they all are leaders in their respective those having a short-term view, can look at booking part profit and hold the balance. On the other hand, stocks such as Hindustan Zinc, Concord Biotech and Adani Power, corrected by almost 15%, 13% and 7% respectively WoW. Investors can hold their positions, with crucial support seen at 410, 1700 and 480 levels respectively.
Time of India
28-04-2025
- Business
- Time of India
Loan tenure, interest rate- Remember this while taking a home loan
Vasudha and Abhinav Kapoor, both working professionals, have lived in a rented home for five years. They are now ready to buy a Rs.2.5 crore house in Mumbai and have saved Rs.90 lakh for the down payment. They are also exploring home loan offers from banks and housing finance companies . They have checked the interest rates and are leaning towards the lender offering the lowest rate. Is choosing a home loan solely on the basis of interest rate the right approach? #Pahalgam Terrorist Attack India stares at a 'water bomb' threat as it freezes Indus Treaty India readies short, mid & long-term Indus River plans Shehbaz Sharif calls India's stand "worn-out narrative" When financial institutions and lenders offer a loan, the risk remains on their books, making it their responsibility to assess the creditworthiness of the borrower. For borrowers, the focus should be on comparing the product and service features. The key aspects to evaluate include loan tenure, fixed versus floating interest rates, and administrative or processing fees. Still confused between New vs Old Tax Regime? Find out which one saves you more with our tax calculator! Vasudha and Abhinav Kapoor must carefully review and compare the terms and conditions from different lenders before finalising their decision. The loan amount, or the percentage of the property cost a lender is willing to finance, can vary. As borrowers, the Kapoors may want to minimise their monthly equated monthly instalment (EMI) outgo. The EMI depends on the loan amount, tenure and interest rate. They should evaluate which combination suits them best and check if any of these terms are subject to change during the loan period . While the Kapoors may want to maximise the loan amount, they must ensure that the EMIs and administrative costs remain manageable. Service-related factors, such as loan sanction timelines, paperwork, compliance checks and disbursal time, can vary across lenders. Evaluating these aspects carefully will help them make an informed and practical choice. Content courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta. Live Events
