Shares of Bajaj Finance surged 2.5% to ₹1,034.4 on Wednesday after UBS upgraded its recommendation from sell to neutral and lifted its price target to ₹1,100 – a 9% jump from ₹910.
UBS’s move follows the NBFC sector’s recent rebound, where unsecured lending has edged up to 10% of GDP in FY24, outpacing banks that still see modest personal‑loan expansion. Analysts note that this cycle of credit growth, coupled with healthier asset quality, positions NBFCs ahead of banks.
The brokerage highlighted “yield‑accretive growth” and “strong asset quality” as key drivers for Bajaj Finance’s upside. It also flagged that unsecured leverage has been flat for three years, suggesting a stable risk profile that could support higher returns.
Looking ahead, UBS maintains its neutral stance but keeps the ₹1,100 target, anticipating further margin tightening. Investors should watch for Bajaj Finance’s FY25 Q1 earnings, expected on October 31, to gauge whether the upgraded outlook materialises.
In the same breath, UBS upgraded L&T Finance to buy and raised its target to ₹380, signalling a broader confidence in the NBFC space. The rating shift for Bajaj Finance underscores the market’s pivot from a “bear” stance to a more bullish view on non‑bank lenders.
Overall, the price action reflects a broader market trend where NBFCs are seen as better positioned than banks, thanks to flat unsecured leverage, improving asset quality, and a liquidity environment that favours funding through bank lines and NCD markets.