Shriram Finance, Cholamandalam, Bajaj Finance, SBI Cards Preferred By HSBC Global Research

In a recently conducted review of the lending sector across Indian cities, HSBC Global Research found out that balance transfer in floating rate loans was high, and "irrational" competition was rising in a few segments, while asset quality remained stable.

HSBC Global Research preferred Shriram Finance Ltd., Cholamandalam Investment and Finance Co., Bajaj Finance Ltd., and SBI Cards & Payment Services Ltd. The brokerage has lifted the target price for the scrips, while keeping the ratings unchanged.

Explained below is HSBC Global Research's view on various segments of the lending sector:

In the declining interest rate scenario, housing finance companies will underperform, HSBC Global Research said. The brokerage has reduced rating on Bajaj Housing Finance Ltd., and has a 'hold' rating on LIC Housing Finance Ltd.

Affordable housing finance companies are facing yield pressure from balance transfers. High balance transfers will make them spend more on sourcing, which will keep their operating expenses high and lead to continued attrition of better-quality portfolio, HSBC Global Research said.

The brokerage expects Bank of Baroda and Punjab National Bank to lower their rates following State Bank of India's move.

The asset quality outlook in the vehicle finance segment remains stable except two-wheelers. The vehicle demand outlook for financial year 2026 is expected to remain week, according to HSBC Global Research. Market share gains, distribution and inflation would drive growth of assets under management.

HSBC Global Research did not notice any major concerns regarding decline in resale values, high re-possession rates, squeezing of freight operators' margins despite flat-to-lower freight rates.

Shriram Finance Ltd., and Cholamandalam Investment and Finance Co. are key beneficiaries in this space.

The brokerage noted that it did not observe "irrational" pricing among lenders in the business loan segment. The competitive pressure on rates and balance transfer activity continues. The unsecured business loan space appears riskier, as instances of clients having multiple loans are rising.

The x-bucket collection efficiencies were noted in most Indian states in the primary checks of HSBC Global Research. The efficiency has increased 98.5–99.5% in February. This improvement has led to a reduction in the high employee attrition rates over the last year.

Disbursements for most MFIs are expected to pick up in the fourth quarter of the financial year 2025, HSBC Global Research said. Microfinance institutions expect less impact of Guardrail 2.0, compared to Guardrail 1.0.

In the microfinance space, HSBC Global Research has a 'buy' rating on Ujjivan Small Finance Bank Ltd.