What pressurizes the margins of NBFCs? Share Market Tips

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What pressurizes the margins of NBFCs?

The performance of non-banking financial companies in the last 2 years has been better than the banking sector. Earning of sector has been better due to better credit growth, business model and lower issue of NPA. But increasing the bond yield and lending rates is a concern for the sector at the moment. Experts say that increasing lending rates will directly impact NBFC's boroughing. In this case when many stocks related stocks are expensive, the short-term mid-term stocks are showing low upside potential. Further pressure may be seen on the earnings per share. 

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In the last 6 months, the bond yield has increased by about 100 basis points i.e. one per cent. At the same time, the lending rates of banks have also increased. Recently, SBI had increased its lending rate by 20 basis points by State Bank of India. In this case, it would also be expensive to take loans from banks for NBFCs so that there may be pressure on margins in the coming days. 

Stock performance can be seen on the impact 

market expert Sachin Sarvade says that the lending rate has increased in the last few months. It would be expensive to take a loan for NBFCs too. In such a situation, the pressure on their net interest margin will appear. Which will have direct impact on stock performance. Global agency Morgan Stanley has also reported about the possibility of further margins falling in NBFC sector due to rising lending rate. From which the agency has cut the forecasts of stocks on the earnings.  

Sachin Sarvade says that the sector seems to be negative for the short term. It is advisable not to invest in the sector in terms of short-to-mid-term. Investors should come from long-term perspective in this sector and invest in good fundamentally with a target of 12 to 18 months. At the same time, if there is a rally in the market, in the current market, the valuation of the shares which have become expensive has to be sold. 

One aspect,

however, is that the brokerage house Motilal Oswal believes that there will be more impact on the companies which have more dependence on banks for loans. According to the report, in the last few years some companies have reduced dependence on banks for loans. Due to the liquidity in the system in the last 3 years, many companies have diversified their loyalty profiles. Thus, increasing the bond yield and the lending rate does not seem to affect the entire sector. 

Concerned

by the legendary Sachin Sarvade, the ban on the sector has reduced; the effect of GST has diminished. At the same time, the advantage of Rara being implemented is the focus of the government on the coming days, which will benefit the sector. In the MSME sector, 18 per cent of the total loan amount is from NBFC sector, which is expected to be 20 per cent next year. Overall, credit growth is also better. At the same time, there is not much concern about balancesheets. In such a long term, there is hope for good business in the NBFC sector. 

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