Stock prices of housing finance companies are climbing feverishly on the bourses amid robust buying interest in the shares of non-banking finance companies.

Stock price of housing finance companies such as CanFin Homes, Gruh Finance, Indiabulls Housing Finance and LIC Housing Finance hit their all-time highs on Thursday while Dewan Housing Finance Corporation hit its fresh 52-week high. Stock prices of mortgage lender HDFC, GIC Housing Finance and Repco Home Finance hit their all-time high levels in last week of July.

While one analyst from a domestic stock broking firm said housing finance companies are catching up as they had lagged in the rally by the asset financing/ microfinance/ gold loan finance companies, G Chokkalingam, Founder, Equinomics Research and Advisory, pointed out that NBFCs, in general, have been continuously growing in double digits like fast-moving consumer goods companies.

The combined reported net profit of the eight housing finance companies jumped 23.6 per cent year-on-year in June 2016 quarter. The same had grown 18 per cent in FY16 compared with FY15.

Rate cuts to boost

“With inflation coming down due to good monsoons, fall in vegetable prices and robust increase in acreage of pulses (one of the key reasons for high inflation), there is a rate cut possibility in the upcoming policy,” Chokkalingam said. Rate cuts will help non-banking finance companies as they borrow from banks. Lower rates will help players pass on the benefits to customers and boost the loan book further.

IDBI Capital recently said housing finance companies in general are exhibiting strong asset quality due to the retail nature of their loan portfolios.

The brokerage firm sees factors such as PMAY-G & U, Real Estate Regulation Act as well as the innovative changes being ushered in by various State governments for acquiring land for housing projects to provide a strong foundation for housing demand over the medium term.

Many fully priced

However, all the above positives have been more than factored into the stock prices now and market experts advise short-term investors to book profits now while maintaining that the long-term view is bullish.

Valuation looks high for most companies now with the range being 1.6 times to as high as 12 times FY17 adjusted book value.

Centrum Broking finds valuation of Repco Home Finance, CanFin Homes and GIC on the higher side. Among the others, its recommendation is accumulate or hold on HDFC, LIC and Gruh.

Many analysts continue to recommend buying in Dewan and Indiabulls.

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