Bajaj Housing Finance Shares Surge Over 150%: What Led to the Initial Rally?

Bajaj Housing Finance shares experienced a significant decline, dropping 11% over two trading sessions following a remarkable debut on the stock exchanges. The shares initially surged after their listing on September 16, where they opened at ₹150, reflecting a premium of 114.28% over the IPO issue price of ₹70. However, the recent downturn has left investors questioning their next move: should they buy more shares, sell their holdings, or hold onto them?

Full Details on Bajaj Housing Finance’s Market Performance

Bajaj Housing Finance Ltd (BHFL) made headlines when it debuted on the stock market with impressive gains. The stock rose by over 150% shortly after its listing, reaching a high of ₹188.45. However, this rapid increase attracted profit booking from investors, leading to a sharp correction in the following days. On September 18, shares fell by approximately 9.4%, closing at ₹157.2 on the National Stock Exchange (NSE) and ₹157.5 on the Bombay Stock Exchange (BSE) .

Market Capitalisation and Trading Dynamics

The market capitalisation of Bajaj Housing Finance has also taken a hit, plummeting by ₹20,237.39 crore to ₹1,30,918.47 crore within just two days. This decline is notable given that the company had achieved a market cap exceeding ₹1.5 lakh crore shortly after its IPO . Analysts have pointed out that such corrections are not uncommon after an initial surge in stock prices.

Despite this downturn, analysts remain optimistic about the company’s long-term prospects. For instance, PhillipCapital has initiated coverage on Bajaj Housing Finance with a target price of ₹210 per share, citing strong growth potential and a robust business model . The company is expected to maintain a growth rate of around 30% annually.

Reasons Behind the Price Drop

Several factors contributed to the recent price drop of Bajaj Housing Finance shares:

1. Profit Booking: After two days of substantial gains, many investors opted to book profits, leading to increased selling pressure on the stock .
2. High Valuation Concerns: Some analysts have expressed concerns about the stock’s high valuation compared to its peers in the housing finance sector. This has led to caution among potential investors .
3. Market Sentiment: The overall market sentiment also plays a role in stock performance. On the day of the decline, while Bajaj Housing Finance shares fell, other indices like the BSE Sensex were trading higher .

Expert Opinions: Buy, Sell or Hold?

Given the current market dynamics and expert analyses, here’s what different analysts are suggesting:

• Long-term Hold: Many analysts recommend that investors who obtained shares during the IPO should hold onto them for future growth potential. The company’s strong brand presence and management are seen as positive indicators for long-term performance .
• Cautious Buying: For those looking to invest now, experts advise waiting for further corrections before making any purchases. This strategy allows investors to enter at potentially lower prices while still benefiting from the company’s growth trajectory .
• Profit Booking for Conservative Investors: Some analysts suggest that conservative investors might consider booking profits due to the recent price surge and subsequent decline . This approach can help mitigate risks associated with market volatility.

Future Outlook

Looking ahead, Bajaj Housing Finance is expected to continue focusing on its core business areas such as home loans and lease rental discounting (LRD). Analysts believe that these segments will drive growth and enhance profitability in the coming years.

The company’s strategy of sourcing around 40% of its home loans from its parent company, Bajaj Finance’s customer base, is also seen as a competitive advantage that could lead to improved return ratios . With an increasing focus on salaried customers and risk-adjusted spreads, Bajaj Housing Finance aims to solidify its position in India’s housing finance market.

Disclaimer: The information given in this article is from investment experts and brokerage companies, they do not represent Local Haryana. Before taking any investment related decision, you must consult a certified expert.