Companies such as Bajaj Finance and Capital First, among others, have been able to innovate, use technology, disrupt markets and gained advantage among competitors to pursue higher growth.
Consumption theme seems to have found interest among investors as the sector has witnessed a stellar run. Among them, consumer finance companies have also performed well. But the rally has brought about questions on the valuations and the right time to buy them.
Among the pack, Bajaj Finance has been in the news recently. The stock was recently included in the Nifty index and crossed a market capitalization of Rs 1 lakh crore. Additionally, it also raised funds through a qualified institutional placement (QIP).
“The stock is a great story which represents consumer credit growth in the country. Consumer retail credit side is seeing growth as income levels rise and more youth are coming into the job scene. So, the propensity to leverage themselves is high,” S Krishna Kumar, CIO-Equity, Sundaram Mutual Fund told CNBC-TV18 in an interview.
Further, he said that companies such as Bajaj Finance and Capital First, among others, have been able to innovate, use technology, disrupt markets and gained advantage among competitors to pursue higher growth. Such sectors are comfortable to hold for a long term.
Other stocks that gained were the auto pack, especially tyre stocks.
Speaking on it, Kumar said that the Indian tyre industry has matured and there has been a consolidation in terms of radial business taking off. Government actions against dumping by China also helped the sector, he added.
Meanwhile, in the housing finance space, he sees some pain in the real estate financing side due to developer loans and loan against property fronts. Going forward, it expects competition pressure to ease once corporate cycle sees a pick up.
Kumar also highlighted issues with respect to borrowers’ quality as well, but said there are tools available to judge them.“People can be worried on quality of consumers, but there has been a lot of credit scores available across markets. People are able to take a fairly educated call on asset quality due to that. Plus, microfinance institutions giving centralised data is leading to intelligent lending going on,” he told the channel.