Since the beginning of the year Bajaj finance has been moving up steadily. The company has been a leader in the NBFC pack and has been consistently growing its share in the market. India is a deeply under penetrated market in terms of financialization of the economy and robust companies like Bajaj finance have good head room to grow their business manifold. Industry trends have recently turned favorable with RBI cutting rates by 25bps acting as a positive for the NBFC pack liquidity woes have eased off. Expectations for the Q4FY19 earnings are also on the positive end as the company has recently raised its lending rate by 10-35bps across all products. This should help improve spreads and at the same time the outlook for AUM growth also remains robust, this coupled with a consistent track record of profitability, innovation and prudent approach makes us optimistic about the stock.
Bajaj Finance corrected 50 percent from the highs of 3000 odd made in Aug-18. The sharp correction brought the stock down to the previous highs of 2000 odd. Previous highs act as a good support zone and the counter respected the same and bounced back from there. This is also the Fibonacci confluence zone and hence a good support for the counter. Fib analysis is indicating that the trend of the stock is very strong and is intact despite the huge correction. In the same zone we also have a trend line support. Therefore multiple supports in the same zone have lifted the stock above its Aug-18 highs. The counter retested the breakout zone and that’s a positive indication again. The Fibonacci extension is giving a cluster at 3362-3393. Therefore this is the zone the stock should now test which is some 11 percent from the current levels of 3055. The moving averages on the RSI have given a positive crossover and that is again bullish in nature.