Analyst Call Tracker: BFSI counters top optimism list in September, brokerages bullish on Shriram Finance, SBI Life, ICICI Bank

Some notable additions to the list are ITC and Mahindra & Mahindra, as analysts turn more positive on the counters.

For the fourth consecutive month, NBFC major Shriram Finance remains the Street's top pick in the Nifty 50 index, with BFSI players SBI Life and ICICI Bank securing the second and third position respectively, according to Moneycontrol's September analyst call tracker.

Based on Moneycontrol's tracker, Shriram Finance bagged 41 'buy' calls during the month gone by, up from 39 calls in August. Insurance giant SBI Life also had only buy calls, as all 34 brokerages covering the company gave it a thumbs up.

While private sector lender ICICI Bank had 45 'buy' calls, it secured the third position on the optimism list as a result of the 5 'hold' ratings issued.

Some notable additions to the list are ITC and Mahindra & Mahindra, as analysts turn more positive on the counters.

Why is the Street bullish on Shriram Finance?

Shriram Finance has projected to surpass its stated guidance of 15 percent year-on-year AUM growth for FY25, driven by stronger-than-expected disbursements in the June quarter. In its AUM mix, the company expects MSME loans to grow by 20 percent, old truck financing by 12 percent, and two-wheeler loans to rise between 15-18 percent in the current financial year.

On the asset quality front, Shriram Finance has shown steady improvement following its merger with Shriram Transport Finance Company and Shriram City Union.

Why is the Street bullish on SBI Life?

Brokerages are bullish on SBI Life Insurance as a result of its strength in its distribution and cost structure. While these business moats remain extremely relevant, the wide customer base also makes SBI Life least vulnerable to regulatory changes in terms of lower tax exemptions or higher surrender value.

Considering SBI Life’s ULIP-heavy product mix, the management envisages limited impact on VNB (Value of New Business) margin from new surrender regulations. Overall, the management remains optimistic about the growth trajectory tracking its ~18-20 percent APE growth guidance; it expects margins to range at around 28 percent.

Why is the Street bullish on ICICI Bank?

According to analysts, ICICI Bank is well placed on the deposits front at a time when the banking industry exhibited signs of widening gap between deposit and credit growth.

International brokerage CLSA stated that it does not foresee any significant rise in deposit costs going ahead for ICICI Bank. Rising deposit costs typically impact bank's net interest margins (NIMs) as the interest it pays on deposits tend to go higher than the interest it earns on loans.

Further, analysts expect margins to remain stable for ICICI Bank in the upcoming quarters, with any rate cuts resulting in only temporary NIM compression. In the quarter ended June, ICICI Bank had registered 42 basis points YoY NIM contraction to 4.36 percent.

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