As the Nifty touched an all-time high one sector that has sprinted a lot in the past month was the non-banking financial services. While Nifty moved 2 percent in June and the midcap index moved over 4 percent, NBFCs like Piramal, L&T Finance Holdings, Mahindra & Mahindra Financial Services (MMFSL) and PNB Housing Finance have risen between 10 percent and 20 percent. Cholamandalam Investment and Finance Company has risen 51 percent in 2023. So, what is going right for NBFCs and will the run continue in the medium term?

In an interview with CNBC-TV18, Deepak Shenoy, Founder of Capitalmind, and Digant Haria, Co-Founder of Greenedge Wealth Services, shared their insights on the current state and outlook of non-banking financial companies (NBFCs). They expressed their optimism about the performance and prospects of NBFCs in the medium term.

First up, Shenoy highlighted the positive shift in liquidity dynamics, stating that the system is currently running with a surplus of liquidity. This bodes well for NBFCs, as access to liquidity is crucial for their operations and growth. The ease in liquidity conditions since April indicates a favourable environment for NBFCs to thrive.

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“From April there has been a lot of easing of liquidity; we thought liquidity will get more expensive, but it has not. In fact, now the system is running a bit of surplus liquidity,” said Shenoy.

Haria echoed the sentiment of a prosperous future for NBFCs, specifically emphasising their potential over the next year. Haria believes that NBFCs are poised to perform exceptionally well, expecting a continued rally in the sector. Despite market cycles, Haria expressed confidence in the resilience of prominent NBFCs such as Bajaj Finance and Cholamandalam Investment, highlighting their ability to weather economic fluctuations.

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“When earnings are so strong, markets and people tend to forget that these are cyclical upturns in these companies; a lot of these companies are cyclical because their segments are cyclical. So cyclical upturn is there and the markets will celebrate that for the next one to two years,” Haria said.

Talking about opportunities in the NBFC segment, both Shenoy and Haria acknowledged the ample opportunities present within the NBFC space. Shenoy emphasised that the favourable liquidity conditions and surplus within the system create a conducive environment for NBFCs to explore and capitalise on these opportunities. Haria shared a similar view, emphasising the vast potential for growth within the sector. This positive outlook underscores the optimism surrounding NBFCs and their ability to seize opportunities in the coming months.

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(Edited by : C H Unnikrishnan)

First Published:Jun 28, 2023 2:09 PM IST