NBFC sector could be a big winner in coming years; M&M Financial Services & Shriram Finance could give 30% upside each
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The Indian Non-Banking Financial Company (NBFC) sector is poised for a turnaround in FY26, driven by an anticipated easing of regulatory pressures and a favorable interest rate environment. The Reserve Bank of India (RBI) recently cut the repo rate by 25 basis points to 6.25%, signaling the beginning of a rate-cut cycle that is expected to be shallow but beneficial for NBFCs. The move comes after a challenging period marked by high borrowing costs, regulatory tightening, and macroeconomic headwinds. The RBI’s commitment to maintaining sufficient systemic liquidity will aid NBFCs, ensuring a stable credit environment that fosters growth and expansion. The last 15 months have seen heightened regulatory scrutiny, including increased risk weights on unsecured loans and specific business restrictions for certain NBFCs. However, recent developments suggest a more balanced regulatory approach, fostering growth while ensuring compliance. Industry...