Even as Nifty 50 is down almost 10% over the last one year, some of its components have surged up to 45% in this period- one of them is a multibagger NBGC stock that has seen profit booking this year, raising questions if it is a stock to buy now at the current juncture.
The stock we are discussing is Shriram Finance – the heavyweight non-banking financial company (NBFC) stock, with a market capitalisation of ₹2,22,363 crore on the NSE as of 2 October.
Shriram Finance share price trend
While year-to-date, Shriram Finance share price is down 7.33% compared to a 14.25% decline in the Nifty 50, the stock has delivered a strong return of 45.68% in the last 1 year.
On a monthly scale, the stock shed 11.5% in September, snapping its five-month winning streak.
On longer timeframes of three and five years, the stock has surged 146% and 265%, respectively, delivering multibagger returns on the NSE.
Shriram Finance shares hit a 52-week high of 6 August this year and a 52-week low of ₹611.15 on 30 September last year.
Is Shriram Finance a stock to buy?
Looking at the fundamentals, experts and brokerage firms find the stock a buying opportunity for the long term, citing the company’s diversified franchise, resilient asset quality, and strong underlying demand as key positives for it.
Domestic brokerage firm Motilal Oswal Financial Services has a buy call on the stock with a target price of ₹1,220, which implies a 29% upside from the stock’s 1 October close of ₹945 on the NSE.
Motilal Oswal underscored that macro factors are currently exerting pressure on the stock, but these headwinds are near-term in nature.
According to the brokerage firm, “several of the company’s structural earnings drivers, such as higher growth capacity, lower incremental cost of funds (aided by credit rating upgrade), and product diversification, are only beginning to play out.”
Motilal Oswal expects Shriram Finance to deliver a CAGR of nearly 18% and 29% in assets under management (AUM) and profit after tax (PAT), respectively, over FY26-28, along with return on assets (RoA) and return on equity (RoE) of nearly 4% and 13.5%, respectively, by FY28.
“Near-term macro volatility could delay the pace of earnings improvement, but does not alter the medium-term earnings framework. The combination of a stronger capital base, broader product franchise, and structurally improving borrowing costs should enable Shriram Finance to compound earnings as operating conditions normalise,” said Motilal Oswal.
Technically, Shriram Finance stock has been in a short-term downtrend with the formation of lower highs and lower lows. However, the medium-term trend is sideways, and the stock price is in a long-term uptrend.
According to Aditya Thukral, founder and analyst at AT Research and Risk Managers, as the stock is in correction mode, the price action near support at ₹909 should be watched closely for reversal signs from there.
“A break below ₹900 would signal further extension of the signal and would be a worrisome sign for investors. A bounce in the stock price towards the resistance of ₹1,000 should be used as an exit opportunity for longs, as there is a possibility that this correction could extend further towards ₹750,” said Thukral.
As the stock is in a short-term downtrend, existing investors should look for an exit opportunity near resistance at 1000 and could buy the stock on dips later if there are signs of a reversal.
Vipin Kumar, AVP-Research at Globe Capital Market, underscored that the stock has been consolidating in a slightly upward-sloping channel pattern for the last nine months, with lower band support in the ₹920– ₹880 range and upper band resistance around the ₹1,150– ₹1,180 range.
“Any reversal candlestick with volume support will be a positive development that could lead the stock towards ₹1,040, followed by the upper band resistance of the channel formation. Conversely, a decisive fall below ₹850 will breach the formation on the downside, which could drag it further down towards ₹800,” said Kumar.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
