Shares of Bajaj Finance have doubled in the last four months. Bajaj Finance was one of the largest multi-baggers in the bull market before the COVID-19 scare. Therefore, investors are questioning whether this is the right time to invest in Bajaj Finance in the face of this strong surge.
Non-banking financial institutions have been hit hard by the COVID-19 scare, lockdown and moratorium. Uncertainty in the business of NBFCs and the extended moratorium have raised concerns that their indebtedness could increase. Despite the NBFC having the best track record in the sector, this concern had led to a sharp revision in the share price of Bajaj Finance.
Bajaj Finance is a stock that traded at a very high value before COVID-19. The stock price rose 8-9 times its book value. The market gave Bajaj Finance a value that the best private sector banks such as HDFC Bank and Kotak Mahindra Bank did not get. But the market crash also hit Bajaj Finance hard.
Bajaj Finance, which had earlier traded at Rs.4,850, fell to Rs.1,783 on May 27. But since then, the stock price has risen sharply. The stock is currently trading at Rs.3,450. Bajaj Finance has overtaken SBI as the largest bank in the country in terms of assets in terms of market capitalisation.
When there is an influx of domestic and foreign investors into the market, they mainly buy shares of large companies that excel financially and in other fundamentals. They always consider factors such as good management, corporate governance standards and business ethics. They also consider stocks with high market value and high liquidity.
Bajaj Finance is one of the leading NBFCs in terms of market value, business, assets under management and number of customers. The market provided the value for this quality.
Bajaj Finance’s management has decided not to lend as extensively as it did earlier until conditions return to normal. Even if the business does not expect an immediate return, the surge in stocks will come as a surprise to ordinary investors. Substantial investments were made mainly by investors.
The fundamental advantages of Bajaj Finance still exist. Capital availability was an important factor during the COVID-19 period. Bajaj Finance has no difficulty in raising capital. This is a factor that contributes to the performance at the stock market. At the same time, the stock is currently trading at a very high value. The share price is now five-and-a-half times the book value. This is an expensive stock in the current situation. Therefore, it is advisable for investors to wait for a correction.
