SBI Life, Max Life, Can Fin Homes, HDFC and Cholamandalam are top picks in BFSI sector: Nirmal Bang’s Rahul Arora

Rahul Arora, CEO of Nirmal Bang Institutional Equities, on Tuesday said that SBI Life, HDFC Life and Max Life were his preferred picks within the insurance space.

“We will still be going with the non-lenders. We prefer names like SBI Life and HDFC Life Insurance in the largecaps and Max Life Insurance in the midcaps. If you look at the three of them, the return on embedded value and RoEs are close to about 18-20 percent and they are all gaining market share. However, there is a huge valuation differential between HDFC Life and the rest of the pack. So, to that extent, I am tilted more towards the SBI Life and Max Life,” he said in an interview to CNBC-TV18.

Within the housing finance space, Arora is positive on HDFC Limited and Can Fin Homes. “We are also fairly positive on the housing finance companies. We would look at HDFC Limited in the largecap space and something like Can Fin Homes. Can Fin Homes is doing very well, but the kind of stress that was anticipated post COVID, I think they have delivered spectacular asset quality. It is not the cheapest mid to smallcap NBFC – I think it is trading close to 3 times one year forward price to book, but then nothing is cheap in this market that is quality,” he said.

Arora said that Nirmal Bang has recently initiated coverage on the auto finance companies and is positive on Cholamandalam within the space.

On the markets, Arora said, “I think FY23 has been priced in and it will be very difficult for the market to continuously sustain above 15,000 even with all the liquidity that is trying to support it. So, I think there is a method to the madness on why we have reached 15,000, but that is probably somewhere in that whole range of 15,000-15,500 is probably the high for the year I would think.”