Jefferies expects that growth of non-banking financial services will stabilise while credit costs are expected to decline in the second half of the financial year 2026. The brokerage chose Bajaj Finance Ltd. Cholamandalam Investment And Finance Co. Ltd., Shriram Finance Ltd., and Muthoot Finance Ltd. as its top pick in the space.
Jefferies said that a pick up in economic activity during festive season will be the key factor watch to determine the growth trajectory of NBFCs.
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Net interest margin of NBFCs will likely improve in the second quarter onwards, the brokerage said. Cholamandalam Investment And Finance and Bajaj Finance have guided for 10–15 basis points expansion during financial year 2026.
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Companies which are bond funded like LIC Housing Finance may see some pressure in second half as book reprices lower, Jefferies said. However, these companies saw their portfolio spreads improved 4-9 basis points on the quarter despite cut in home loan rates and prime lending rates as bank liabilities declined quickly.
Non-banking financial sectors are likely to face near-term growth and asset quality headwinds while the net interest margin expansion may cushion the pressure, according to the brokerage.
Jefferies prefers Bajaj Finance Ltd. because of diversified portfolio offsetting segment level pressure. Stress in unsecured personal loans is stabilising and stress in medium, small and micro enterprises' business loans are expected to be manageable.
At Cholamandalam Investment And Finance, soft demand and asset quality should weigh on stock price in the near term. Any pullback can offer attractive entry points especially as sequential trends can improve with NIMs recovering in the second half onwards. Growth and asset quality will likely to improve in the second half.
At Shriram Housing Finance, valuations are at 1.8 times the financial year 26 estimated book value seems reasonable, Jefferies said.
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