Bajaj Finance: Why this rare Nifty outperformer is likely to reward investors in a muted market

Non-banking lender Bajaj Finance is getting fresh attention from analysts after holding up far better than the broader market in a difficult year for Indian equities. The stock is down just about 2% so far in 2026, compared with a nearly 13% fall in the Nifty.

That relative strength has stood out at a time when foreign selling, high US bond yields, elevated crude prices and a weak rupee have dragged Indian benchmarks into one of their worst phases in years. The Nifty fell about 6% in September alone, while financial stocks also came under pressure because of broader risk aversion and regulatory worries.

Foreign investors sold $2.7 billion of Indian equities in September, taking year-to-date outflows to $26.8 billion. Against that backdrop, Bajaj Finance's mild year-to-date decline has made it one of the stronger relative performers among large financial names.


Capital raise adds comfort

The latest trigger is the company's Rs 17,500 crore capital raise plan. Bajaj Finance’s board has approved raising Rs 11,700 crore through a qualified institutional placement and Rs 5,800 crore through warrants to promoter Bajaj Finserv.

Jefferies said the capital raise is slightly higher than its expectation and works out to about 3% of the company's market cap and 13% of FY27 estimated net worth. The brokerage said the move can lift FY28 estimated book value per share by 8%, while keeping earnings per share broadly flat and only marginally lowering return on equity.

"BAF stays among our top picks," Jefferies said in a note. The brokerage said leverage was already fair at 4.9 times, with retained return on equity of 17%. Still, strong loan growth of about 23%, staggered monetisation of Bajaj Finance’s 87% stake in Bajaj Housing Finance and management succession due in March 2028 may have pushed the company to raise capital now.

UBS turns less bearish

Bajaj Finance has also found support from UBS recently. The brokerage upgraded the stock to Neutral from Sell and raised its target price to Rs 1,100 from Rs 910, saying asset quality has improved and the company is better placed to benefit from a new cycle in unsecured lending.

"We believe BAF has cleared its asset quality issues across unsecured products, while an increased provision coverage ratio acts as a cushion against macro headwinds," UBS said.

The brokerage expects stronger growth in higher-yielding loans to support earnings. It sees Bajaj Finance delivering more than 30% EPS growth in FY27, though growth could slow to the high teens in FY28.

Why investors are looking again

The case for Bajaj Finance rests on growth, capital and asset quality. Loan growth remains strong. Fresh capital gives the company room to grow without stretching leverage. Asset quality trends have improved enough for some brokerages to turn less cautious. That combination is drawing investor interest even as the broader market remains weak.

The company had a healthy first quarter with strong AUM growth of 24% YoY, stable NIMs unlike peers, steady improvement in asset quality and lower credit cost on guided lines, leading to profit beating the estimate by 5%. Management guided for continued growth momentum while delivering profit growth ahead of AUM led by cost discipline and risk management.

Disclosure: This article has been written by Podishetti Akash, who is not a SEBI-registered Research Analyst or an Investment Adviser. Podishetti Akash and his ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclosures here.