Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
10,940.20-63.3
Stock Analysis, IPO, Mutual Funds, Bonds & More

NBFC situation fragile after DHFL, Rel Cap downgrades: Morgan Stanley

The brokerage said markets remain concerned about wholesale real estate loans.

ET Bureau|
Jun 12, 2019, 06.46 AM IST
0Comments
BCCL
Risk,-fall-1---BCCL
Unless mutual funds see a strong surge in inflows, they are unlikely to contribute meaningfully to balance sheet growth at non-banking finance companies or housing finance companies, the firm said.
Morgan Stanley believes that the situation for NBFCs remains fragile especially following the downgrades of Dewan Housing Finance Corporation and Reliance Capital's subsidiary to ‘D’. The brokerage said markets remain concerned about wholesale real estate loans. The foreign firm believes that investors should stick to non-banking finance companies or housing finance companies with strong parentage.

“Following recent downgrades of DHFL and RCAP subsidiaries to ‘D’ to which banking system had significant exposures and will have to make provisions, banks might look to calibrate exposure to the space and be very selective,” said Morgan Stanley.

Unless mutual funds see a strong surge in inflows, they are unlikely to contribute meaningfully to balance sheet growth at non-banking finance companies or housing finance companies, the firm said. If mutual funds see outflows, there is a risk of further cut in funding to the sector, it added.

Morgan Stanley said entities with strong funding access like HDFC could be disproportionate beneficiaries of any improvement in liquidity conditions in terms of both funding access and cost of funding.

Stocks of HDFC, Mahindra & Mahindra Financial Services and Shriram Transport Finance Corporation are at attractive valuations and offer superior risk to reward, the foreign firm said.

“...funding divergence will continue. Entities with strong parentage/vintage will continue to get growth funding. Among other entities, NBFCs into niche high yielding retail loan segments could see better access to funding via bank loans, securitization and co-origination," the foreign firm said.
0Comments

Also Read

Morgan Stanley values PhonePe at $7 billion

Global economy inching towards recession: Morgan Stanley

Morgan Stanley lowers price targets on NBFCs with real estate exposure

Overweight ITC, target Rs 360: Morgan Stanley

Morgan Stanley scales back Sensex June 2020 target to 40,000

Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service