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Mumbai: Non-banking and housing finance companies are likely to see slower loan and revenue growth going ahead, but these negatives are in the price for most of these stocks, according to Morgan Stanley.
Asset quality will be the key metric that will determine the future course for investors across wholesale and retail NBFCs, said Morgan Stanley.
Housing Development Finance Corporation, Mahindra - Mahindra Financial Services and Shriram Transport Finance Corporation are the top picks of Morgan Stanley.
The investment bank said this is a one-year view with first quarter likely to be sluggish across NBFCs, especially auto financiers like Mahindra - Mahindra Financial and Shriram Transport.
“For most NBFCs / HFCs this (slower loan and revenue growth) is driven by the slower demand environment, as underscored by weak news flow around both auto sales and housing,” said Morgan Stanley.
The firm said slower growth is already discounted in shares of auto financiers Shriram Transport and M- M Financial Services.
Loan growth for HDFC and LIC Housing Finance is likely to be broadly steady in mid-teens in the April-June quarter, said Morgan Stanley.
Shares of Shriram Transport have fallen 13.8% in the last one year while those of M-M Financial Services have declined 20% during the same period.
Shares of HDFC gained 15% in the last one year while those of LIC Housing Finance have gained 7.7% in the same period.
Morgan Stanley expects net interest margins to moderate at most lenders in the first quarter due to delayed impact of higher funding costs.
Asset quality trajectory will be the key element that will determine both the stock performance around the results and in the medium term, said Morgan Stanley.
Stock Market
Negatives in price for most NBFCs, but slowdown likely to continue
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