UBS Upgrades Bajaj Finance and L&T Finance: Brokerage Spots Fresh Credit Rally in NBFC Sector

Indian financial stocks recorded robust momentum on Wednesday, September 23, mirroring broad-based strength as the benchmark Nifty settled comfortably above the 23,400 mark. The financial services sector emerged as a primary growth driver during the trading session, logging gains exceeding half a percent with multiple constituent stocks surging beyond 1 percent. Adding strong institutional backing to the rally, global brokerage major UBS published a comprehensive sector update, revising its investment stance and issuing ratings upgrades for prominent non-banking financial companies (NBFCs).

Unsecured Lending Tailwinds and Easing Gold Loan Pressure

According to the UBS analysis, unsecured retail credit expansion across the domestic market is demonstrating renewed structural strength, spearheaded by steady demand for personal loans. The brokerage firm noted that this lending acceleration is supported by resilient asset quality, well-managed household leverage ratios, and robust systemic liquidity. A critical structural catalyst highlighted in the report is the noticeable deceleration in gold loan momentum across organized players. UBS strategists observe that cooling growth in gold-backed collateralized lending is naturally easing competitive friction in the personal credit marketplace, allowing specialized retail NBFCs to capture wider market share and expand their consumer lending portfolios.

Bajaj Finance Upgraded from Sell to Neutral

Among the primary rating revisions, UBS upgraded consumer finance bellwether Bajaj Finance, lifting its recommendation from "Sell" to "Neutral" with an updated target price of ₹1,100 per share. The upgrade provided an immediate fillip to trading volumes, propelling the stock up by more than 3 percent on Wednesday to close at ₹1,043 on the bourses. Analysts noted that improving retail credit stabilization and solid asset quality metrics warrant a more constructive stance on the franchise after sustained valuation consolidation.

L&T Finance Secured 'Buy' Rating with ₹380 Target

The brokerage demonstrated even stronger conviction on L&T Finance, elevating its investment rating from "Neutral" to "Buy" with a revised target price of ₹380 per share. UBS highlighted that accelerating traction across the company's personal loan portfolio, paired with an expanding retail franchise, is anticipated to lift Return on Assets (ROA) toward the 3 percent milestone. Market participants welcomed the assessment, pushing L&T Finance shares 1.7 percent higher to end the session at ₹310.

Broader Sector Conviction: Buy and Neutral Calls

In its wider evaluation of Indian shadow banks, UBS reiterated its high-conviction "Buy" calls on Poonawalla Fincorp, Cholamandalam Investment and Finance Company, and Shriram Finance, all of which tracked higher during Wednesday's trading hours. Conversely, the brokerage maintained a measured "Neutral" stance on HDB Financial Services, SBI Cards and Payment Services, and Mahindra & Mahindra Financial Services (M&M Finance), citing sluggish near-term credit growth and margin pressures as key rationale for a wait-and-watch approach.