Why are investors selling Bajaj Finance shares post Q1? Stock falls 5%

Bajaj Finance shares nosedived on the BSE today as investors turned cautious on the near-term outlook post the NBFC's Q1 results. Read to find out investment strategy in the stock

A cautious commentary from the management of Bajaj Finance, after the June quarter results, has soured investor sentiment. Shares of the consumer financier nosedived 6.3 per cent on the BSE to a low of ₹897.65 apiece during intraday trade, before recouping losses partially to end 4.7 per cent lower (from previous close) at ₹913.65. The stock accounted for nearly 14 per cent of the 721-point (0.88 per cent) loss in the BSE Sensex on Friday. 

While announcing its financial results for the first quarter of the current financial year (Q1FY26), Bajaj Finance said it is seeing stress build-up in the two-wheeler, three-wheeler, and the micro, small and medium enterprises (MSME) segments. This came even as the company took several actions across all products to reduce the contribution of customers with multiple loans. 

This, it said, may keep credit costs elevated along with capping growth in assets under management (AUM) during the financial year. MSME loans accounted for nearly 12 per cent of the total AUM at the end of the June quarter, while the two/three-whe­eler financing accounted for 3.6 per cent, and car loans 2.8 per cent. Mortgages rema­ined the top business segment, 

cornering 31 per cent of the total AUM, which stood at ₹4.41 trillion at the end of June 2025, up 25 per cent year-on-year (Y-o-Y). 

  “A slowdown in Bajaj Finance’s AUM growth is inevitable in FY26. Mortgages are likely to grow slower at 21-23 per cent (3 percentage points slower than earlier). This, along with MSME, two-/three-wheeler loans, and car loans, forms 49-50 per cent of the book which will likely grow slower in FY26,” said analysts at HSBC. The rest of the portfolio, they added, will have to pick up the slack. 

This is unlikely to be enough to take Bajaj Finance to the 24-25 per cent Y-o-Y AUM growth threshold. 

While the management has, for now, pegged the overall AUM growth between 23 per cent and 24 per cent for FY26, HSBC has cut its AUM growth estimate to 22 per cent Y-o-Y for the year. Worried over the lingering asset quality concerns in the MSME/auto loan segment, analysts at JPMorgan downgraded the stock to ‘neutral’ from ‘overweight’. 

They believe the headwinds could also invite downward revisions in AUM growth estimates for the next financial year as well. This may pause the stock’s rerating for a quarter or two. UBS has a ‘sell’ rating, while Macquarie and Bernstein have ‘underperform’ ratings with respective target prices of ₹750, ₹800, and ₹640.  ALSO READ | HDB Financial extends fall, down 3%; stock nears IPO price; why the fall? 

Analysts believe the medium-to-long term outlook for Bajaj Finance remains constructive even though the growing headwinds might keep near-term stock performance muted. They believe Bajaj Finance remains the “best quality non-banking financial company (NBFC)” despite the challenges. 

Emkay Global Financial Services called the NBFC’s Q1 results “satisfactory,” given the choppy macro environment. The company reported a consolidated net profit of ₹4,765 crore in Q1FY26, higher by 22 per cent over the previous year. Net interest income (NII), too, rose by 22 per cent to ₹10,227 crore, but net interest margin (NIM) contracted 10 basis points (bps) qua­rter-on-quarter (Q-o-Q) to 9.5 per cent. HSBC has ‘buy’ rating (target: ₹1,080), Goldman Sachs has ‘neutral’ (target: ₹969), and CLSA has ‘outperform’ (target: ₹1,150).

 

Bajaj Finance, however, is witnessing meaningful reduction in funding costs, which would aid 5-10 bps Y-o-Y NIM expansion by end-FY26, the management said. 

"Factoring in the Q1 performance and the management commentary, we adjust FY26 growth estimate downward by 1 per cent, while increasing our earnings per share (EPS) estimate by 1-3 per cent on the back of improving margins. This results in 10-15 bps improvement in return on asset (RoA) over FY26-28," Emkay Global said with a 'add' rating and a higher target price of ₹1,000.