If we observe the data of the last 3 years, it will clearly indicate that non-banking finance companies or NBFCs have outperformed where about 6 NBFC stocks have gained more than 100% and as many as 18 have risen around 50% in the year 2017. NBFCs have been a clear gainer in the market due to the exponential growth in the loan book, falling interest rate scenario, huge growth in the underpenetrated sectors with limited reachability of the banks, and also because of the improvement in spreads. As a result, NBFCs have been growing the market share in loans.
Due to the decreasing interest rates, NBFCs have profited from decreasing cost of funds and then having an increased net interest margins (NIMs). This led to the multiple expansion for many NBFCs.
The NBFC’s stocks performance was more than expected for the companies like Muthoot Capital Services, Motilal Oswal Financial Services, Purshottam Investofin, L&T Finance Holdings, Bajaj Finance, and Upasana Finance. These six stocks have doubled up the investors’ wealth in the year 2017 by giving them more than 100% return. So, these become the top NBFC stocks for the investors to buy. While as many as 20 have achieved a return of around 50%. These stocks being Magma Fincorp, M&M Financial Services, Bharat Financial, Manappuram Finance, Muthoot Finance etc. along with many others.
As per the stock market live news, the private banks along with the NBFCs, have taken most of the market share which is around 50%in the last 5 years. The segments include mortgages, LAP and commercial vehicles. The reasons being their expertise, wide distribution networks in exponentially growing retail and SME loans. NBFCs have also benefited from a shift from the unorganised sector to the organised sector in the medium term.
Motilal Oswal share price as on 30th Dec 16 was at a closure price of Rs. 522.2 while as on 11th Sep 17, the close price became Rs. 1293.1 with a YTD % change of 147.63%. Muthoot Capital Services performed even better and takes the first position. The price for Muthoot Capital Services as on 30th Dec 16 was at a closure price of Rs. 198.36 while as on 11th Sep 17, the close price became Rs. 570.15 with a YTD % change of 187.43%. The third on the list is Purshottam Investments. The price for Purshottam Investments as on 30th Dec 16 was at a closure price of Rs. 8.19 while as on 11th Sep 17, the close price became Rs. 19.55 with a YTD % change of 138.71%. The fourth one is L&T Financial Holdings as on 30th Dec 16 with its closure price of Rs. 87.45 while that on 11th Sep 17, the close price became Rs. 203.6 with a YTD % change of 132.82%. The last and the fifth one is Bajaj Finance. Bajaj Finance as on 30th Dec 16 was at a closure price of Rs. 839.25 while as on 11th Sep 17, the closing price became Rs. 1920.6 with a YTD % change of 128.85%.
So, it is evident that NBFCs have gained big time in the year 2017. The surveys and reports show a higher share for the unorganised sector in the rural area and demand for loans in the low-income group.