Fusion Micro, Spandana: Rally in MFI stocks has more legs, say analysts

Analysts expect the sector to see strong loan growth in FY24 and FY25 driven by increase in ticket sizes, strong customer acquisitions, and regulatory tailwinds

During the past six months, shares of microfinance institutions (MFIs) have surged up to 45 per cent on the bourses, outperforming the benchmark S&P BSE Sensex by a wide margin.

The rally, triggered by robust loan growth post the Covid-19-induced demand slowdown, market share gains, and improved net interest margins and asset quality, is here to stay as earnings growth momentum will likely continue, analysts said.

"We expect the re-rating for MFI players to continue as they stay on a strong growth path along with materially lower credit costs which, in turn, should drive faster return expansion. Despite the recent