Vehicle financiers may lose some sheen due to changes in macro factors

While the rising cost of funds might impact margins, high fuel prices and low freight rates could bring some pressure on vehicle demand

With a strong performance and the supporting macro environment, stocks of three major auto/vehicle finance companies - Mahindra & Mahindra Financial Services, Cholamandalam Investment and Finance Company and Shriram Transport Finance Company - have surged 30-50 per cent in the past year. However, unfavourable changes in some macro factors have led to some pressure on these stocks, which fell 6-8 per cent in the past month.

Firstly, the increasing cost of funds could weigh on their profitability, as many banks have started increasing their lending rates, and interest rates on debentures are also trending upward due to the high-yield trajectory.