Auto financier stocks rise; valuations may cap upside

Investors should take selective exposure to the sector at current levels, say analysts

- NIKITA VASHISHT

The double-digit share run for automobile financiers has further to go as near-term risk-reward improves, but investors should cherry-pick stocks due to generally high valuations, analysts said.

“The outlook for vehicle financiers appears mildly positive at this stage, supported by improving margins, gradual recovery in vehicle demand, and stable asset quality. While credit costs remain a watch point, coupled with not-so-cheap valuations, the near-term risk-reward is turning incrementally favourable,” said Arun Agarwal, vice-president for fundamental research at Kotak Securities.

Major vehicle financing non-bank finance companies (NBFCs) have had double digit-gains on the bourses in FY26. Shriram Finance's shares have risen 29.14 per cent (until December 11), M&M Financial Services and Cholamandalam Investment and Finance, and Bajaj Finance have surged 12.50 per cent to 23.58 per cent, ACE Equity’s data shows. The Nifty 50 index has gained 10.12 per cent in FY26, and the Nifty Financial Services index has risen 9.92 per cent.