Veteran fund manager Gurmeet Chadha finds the Bajaj twins — Bajaj Finance and Bajaj Finserv — relatively better among housing financiers than Housing Development Finance Corp and Cholamandalam Finance. His remarks come at a time when financial institutions are scrambling to protect their margins amid rapid increases in COVID-era interest rates.
“There are consumption growth levers that are reflected in discretionary spending in the economy," Chadha, Managing Partner and CIO at Complete Circle, said in an interaction with CNBC-TV18.
He recommends buying Bajaj Finance and Bajaj Finserv shares on dips.
"The Bajaj twins are probably relatively better options among some of the housing finance names like HDFC and even Cholamandalam, where vehicle financing makes a large part of the chunk and we are seeing some uptick in disbursals, and credit quality be maintained," said Chadha.
Bajaj Finance shares have outperformed the overall market by a wide margin over the past few weeks.
In three months, Bajaj Finance has rewarded investors with a return of 18.7 percent, a period in which HDFC has risen 6.8 percent and the Nifty50 benchmark 5.8 percent.
Both Bajaj Finance and HDFC — the country's eighth and ninth largest companies by market value — are positive on the economy's growth prospects in the current environment of steep increases in benchmark interest rates to tackle inflation.
HDFC CEO Keki Mistry believes the level of optimism in the economy is one of the best in recent times.
“The economy is on an extremely strong footing. I genuinely believe that. I genuinely see that in the economy. I talk to friends in different industries. And the optimism level that I have seen today is far higher than I have seen at almost any other time in the past. We have completely come out of COVID-19 (pandemic). So the economy stands on strong footing,” he told CNBC-TV18 last week.
Sanjiv Bajaj, Chairman and Managing Director of Bajaj Finserv, and President of industry body CII, is no less optimistic. He sees a golden opportunity for the economy.
India can grow 8-10 percent in the next 20 years but it needs to stay focused on building strong domestic financial institutions, he told CNBC-TV18 last month.
Chadha also likes some of the Tier 2 banks where "the worst of asset quality and credit cost is behind... something like an IDFC First".
"Maybe relatively the risk reward is better there, but it remains a portfolio stock for me for the long term,” he said.
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