"We are not a SEBI registered advisor, and this should be considered as a research case study only."

Despite the recent turmoil and uncertainty in the global banking and finance sector, particularly due to shutdown of SVB bank and the collapse of Credit Suisse, the Indian banking and finance system has demonstrated strength in its numbers. The government and RBI have taken several cautious measures to stabilize the balance sheets of Indian banks, such as encouraging fixed deposits by removing LTCG benefits from debt funds and tightening monetary policies. As a result, the Indian banking system has remained resilient and unaffected by the recent sparks of financial instability seen in some advanced economies.

The Non-Performing Assets (NPAs) have been decreasing every year, and some banks and NBFCs have not even had to use their entire COVID bad loan provisions. This report focuses solely on investment picks and the relative valuation of companies.

Bajaj Finance Ltd

The company has a diversified lending portfolio, including consumer loans, personal loans, and business loans.

Technicals:-

This is a Weekly chart of Bajaj Finance. The chart indicates that the stock is trading above its 200-day exponential moving average and has found support at its previous support zone. Furthermore, the stock has broken out of an inclined trend line, adding to its appeal. What's noteworthy is that historically, whenever the stock has reached its 200 EMA on the weekly chart, it has bounced back strongly.

Except for the time during the pandemic, the stock has not gone below its 200-day exponential moving average since 2009.A potential scenario is that the stock could revisit its breakout level around 6000 before continuing its upward momentum.

Now, let's take a look at the fundamentals.

Fundamentals:-

Fundamentally, this company can be considered the strongest among the NBFCs. Here are a few supporting points as to why it may be a good time to enter the stock now.

• Valuation:- We found the valuation attractive as compared to the robust growth the company has shown.

The current Price to Book Value of the company is trading at 7x, which is one of the lowest in the last 10 years. This can be attributed to a significant price correction in the stock.

• Lowest NPA(Non-Performing Assets) in NBFCs:-The gross NPA and net NPA of Bajaj Finance as of December 31, 2022, stood at 1.14% and 0.41% with increased asset quality. Whereas the industry Net NPA average is above 3% .
  
• The stock is highly appealing due to its strong Net Interest Income and Capital Adequacy Ratio. A strong capital adequacy ratio (CAR) of 28.4% reflects the company's ability to withstand unexpected losses and its readiness to take on new business opportunities. Moreover, it has demonstrated a remarkable compounded profit growth of 36% over the past five years. The Return on equity is impressively 23.5% with Return on capital employed 11.70%.
  
• The company is a leader in its diversified lending business. Here we have prepared an infographic of its dominance in two specific lending business consumer lending and Two wheeler vehicle finance category.

• Below we have represented the increasing total asset size of Bajaj Finance. As the total assets of the company are increasing year on year, it signifies that the company is able to generate more business and expand its lending activities.

Disclaimer: Please note that the following information is intended for educational purposes only and should not be construed as a recommendation to buy or sell any securities.

Current Market Price:- 6180

Stoploss:-5518

Target:-7500 above

SBI Card

SBI Cards is a credit card company owned by the State Bank Of India, that offers credit cards to customers. With a market share of nearly 19%, it is the second-largest credit card issuer in India, following HDFC bank.

Technicals

On the daily chart of SBI Card, the stock appears to have reversed its downtrend to an uptrend by finding support at the 50-day Exponential Moving Average. The stock has also formed a double-bottom pattern, which adds to the bullish outlook for the stock. Furthermore, the stock is currently finding support at its previous support zone, reinforcing the potential for an upward rally.

Fundamentals

The company benefits from the strong brand reputation of SBI and the growing demand for credit cards due to customers' increasing aspirations, making it an attractive investment opportunity.

• It’s the second-largest credit card issuer with a high Return on Equity of 25.7%, ROCE of 13.05% and Return on assets (ROA) of 5.63%, which are bigger numbers than its peers. The stock has not given rally as compared to its high Return on Equity, which makes it more attractive.
• In the past 5 years, the company has exhibited a strong compound annual growth rate of 30% in profits, along with a sales growth of 30% over the last decade. Furthermore, the company has maintained a low net non-performing asset ratio of 0.80%, which is significantly below the industry average.
  

Disclaimer: Please note that the following information is intended for educational purposes only and should not be construed as a recommendation to buy or sell any securities.

Current Market Price:- 786.70

Stoploss:- 728.95

Target:-911.85

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