Bajaj Finance & Finserv Shares Surge Up To 9% As Citi Retains 'Buy' Rating, Sees 17% Upside; Check TP

The shares of Bajaj Finance and Bajaj Finserv lit up the stock markets on Thursday, January 2, 2025, as both emerged as the top gainers on the Sensex and Nifty. Propelled by a bullish outlook from international brokerage firm Citi, the Bajaj twins soared up to 8.5%, setting an upbeat tone for the financial sector.

As of 12:45 pm, Bajaj Finserv shares were trading at Rs 1,689.60 per share on the National Stock Exchange (NSE), up 7%, while Bajaj Finance was up 4.9% at Rs 7,275.55. The rally gained further momentum as the session progressed, with Bajaj Finance climbing 6% to Rs 7,338.35 and Bajaj Finserv surging 8.5% to Rs 1,708.90 by 1:10 pm.

What's Driving the Rally?
The optimism around Bajaj Finance stemmed from Citi's report, which reaffirmed its 'BUY' rating for the stock with an ambitious price target of Rs 8,150. This indicates a potential upside of 17.51% from its closing price on Wednesday, January 1. Bajaj Finserv also benefited from the halo effect of this positive sentiment, given its role as the parent company.

Citi's endorsement of Bajaj Finance is rooted in expectations of robust loan growth, supported by favourable trends in key business segments such as mortgage financing, sales financing, and new ventures. The brokerage also anticipates a 3-5 basis point improvement in net interest margins (NIM), which could strengthen the company's earnings in the coming quarters.

Citi's Outlook
Citi forecasts stable loan growth, with a quarter-on-quarter (QoQ) increase of 6% and a year-on-year (YoY) growth of 27%. The firm expects the company's AUM to expand significantly, driven by strong performance across mortgage and sales financing segments. A marginal improvement of 3-5 basis points in NIM is expected. A slight rise in credit costs is projected, ranging between 2.2% and 2.5%. Citi emphasized that updates on Bajaj Finance's ongoing management transition would play a crucial role in determining its long-term prospects.

The market's response to Citi's report reflects investor confidence in Bajaj Finance's ability to maintain growth amid a competitive landscape. Bajaj Finserv, as a non-banking financial services (NBFC) powerhouse offering lending, insurance, and wealth management solutions, stands to benefit from the strong operational metrics of its subsidiary, Bajaj Finance.

Sectoral Implications
The rally in Bajaj twins reflects the resilience of the NBFC sector, which has been riding on robust consumer demand and favourable macroeconomic conditions. The positive commentary from Citi adds to the growing consensus that NBFCs with diversified portfolios, like Bajaj Finance and Bajaj Finserv, are well-positioned to capture market opportunities in 2025.

For investors, the Bajaj twins present a compelling story of growth and profitability. Bajaj Finance's focus on key growth areas such as mortgage and sales financing, combined with prudent credit cost management, enhances its appeal as a long-term investment.