Non-Lending Finances Q2 Preview- Capital Markets-Linked Companies To Deliver Strong Performance: Motilal Oswal

Motilal Oswal Report

In Q2 FY24, Nifty surpassed the milestone of 20,000, translating into healthy trends in key parameters (volumes, orders, client additions, etc.) for capital markets-related companies.

Both equity and commodity segments continued to witness better-than expected trends in option volumes. Angel One Ltd. and BSE Ltd. would be the biggest beneficiaries of these trends.

In the asset management company sector, net equity inflows in July 2023 and August 2023 were the highest in the past 15 months. The growth in equity AUM was primarily backed by strong SIP flows (SIP flows reaching all-time high in Aug-23) and mark-to-market gains (in July-23), resulting in month-on-month growth of 3.2%/1.4% in MF AUM for the industry in July-23/Aug-23. Increase in AUM would lead to improved performance for both Computer Age Management Services Ltd. and 360 One Wam Ltd.

Ex-crop, the general insurance sector registered strong growth in Aug and Sep-23, with gross written premium growth of 18% YoY. The health segment reported a strong growth for 33%/15% YoY in July/Aug-23. The cut-throat pricing environment in the motor industry is beginning to ease. Thus, in July-23 and Aug-23, the Motor segment (supported by the Motor own damage segment) maintained its growth momentum of 15% and 16% YoY.

Amidst the ongoing price hikes, the claims ratio is expected to show improvement on a YoY basis. We expect Star Health and Allied Insurance Company Ltd. and ICICI Lombard General Insurance Company Ltd. to report improvement in profitability.

We remain positive on the long-term growth potential of the non-lending financials, given their broader themes of financialisation and digitisation of savings.

Our top picks in this space are Angel One and Star Health.

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