CNBC-TV18 spoke with Nidhesh Jain, analyst, Investec Capital Services, on his expectations from the Non-Nanking Financial Companies (NBFC), housing finance companies and insurance sector.
With regards to Housing Finance Companies (HFC), Jain said two-three companies are facing liquidity crunch and they could see a substantial slowdown in loan growth both quarter on quarter (QoQ) and year on year (YoY) basis. Some companies may also see a sequential decline in the loan book, Jain said.
"Aside from these 2-3 companies, the others are expected to show a steady performance, he said. “As of now, for this quarter we are not hearing any stress build up in the real estate book and the sector will perform quite well on asset quality front.”
"However, the key worry would be on the margin side because the cost of fund for HFCs has gone up substantially. One could see a 10-15 basis points dip in margins for HFCs on an overall basis," said Jain.
On the insurance sector, he said FY17-FY18 were two strong years for the industry and it grew at around 20 percent.
“For the full year, the industry has grown around 9 percent and private sector at 12 percent. However, from a long-term perspective, 14-15 percent is possible for the insurance industry," he said.
According to Jain, LIC still has 40 percent market share and so some private players have the ability to increase their market share going forward.
"For the fourth quarter, SBI Life and Max Life is expected to report strong numbers and also expect a good performance from Bajaj Finance. But the expectation that at current valuations Bajaj Finance will continue to show strong performance for 6-7 years is a bit of stretch," said Jain.