Jefferies has said that the performance of India’s non-banking financial companies (NBFCs) in the first quarter of FY26 was mixed, with rising stress levels across most segments except gold loans. The brokerage attributed the weakness to the broader slowdown in the economy and the impact of unseasonal rains on rural demand. Net interest margins were flat sequentially but are expected to improve in the second quarter, particularly for SBI Card and Cholamandalam Investment & Finance (CIFC).
Looking ahead, Jefferies expects growth and credit costs to stabilise in the second half of FY26, supported by post-monsoon demand recovery. It named Bajaj Finance, Cholamandalam Investment & Finance, and Shriram Housing Finance as its top picks in the sector, while continuing to view Muthoot Finance as a defensive play given the resilience of gold-backed lending.
The brokerage noted that while near-term challenges persist, the longer-term growth drivers for NBFCs remain intact, supported by structural demand for credit in retail and small business segments. It added that a recovery in rural consumption and stability in asset quality will be critical for sector re-rating in the coming quarters.
Disclaimer: The views and recommendations made in this article are those of Jefferies. This article does not constitute investment advice. Investors should consult their financial advisors before making any investment decisions.
