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No one is unaware of the fact that NBFCs have gone through a very tough time in last four
years. Regulatory or Gold Prices, Nothing was falling in place. Their identity was tainted as
being the companies that are merely obtaining a regulatory arbitrage over banks. It didnt
stop here, they were also considered as potential systematic risk to the financial sector. The
entire stock market has been busy writing obituaries for them. But they didnt give up.
Somewhere a magic was working for them but so slowly that it almost went unnoticed, until
RBI released the guidelines for NBFCs in 2014. These guidelines, like a fairies wand,
cleared all the air of uncertainty for NBFCs. And now, these stocks have put entire Dalal
Street on fire. Amay Hattagadi, MD, MSIM and Swanand Kelkar, ED, MSIM have talked on
it to a great extent on why NBFCs stocks are a darling of investors now.
Regulatory Clarity:
The regulatory support that RBI has been sending on the way of NBFC has reduced the
uncertainty that have been hovering over them. This Regulatory clarity came on the front of
Non-Performing Loans and Capital requirements with the sufficient timeframe for their
implementation.
The Role of the wholesale cost:
Since the year 2014, the yield on the 10-year government bonds have come off by 150
basis points. These bonds acted as the proxy for borrowing costs for NBFCs. This drop in
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the cost has helped in major re-rating in NBFC stocks by up to 100% while their asset
quality held its own.
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Disclaimer
The investment advice or guidance provided by way of recommendations, reports or other
ways are solely the personal views of the research team. Users are advised to use the data for
the purpose of information and rely on their own judgment while making investment decision.
Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022
Disclosure
Dynamic Equities Pvt. Ltd. is a member of NSE, BSE, MCX SX and a DP with NSDL & CDSL. It is
also engaged in Investment Advisory Services and Portfolio Management Services. Dynamic
Commodities Pvt. Ltd., associate company, is a member of MCX & NCDEX. We declare that our
activities were neither suspended nor we have defaulted with any stock exchange authority
with whom we are registered. SEBI, Exchanges and Depositories have conducted the routine
inspection and based on their observations have issued advise letters or levied minor penalty
on for certain operational deviations.
Answers to the Best of our knowledge and belief of Dynamic/ its Associates/ Research Analyst:
DYNAMIC/its Associates/ Research Analyst/ his Relative:
Do not have any financial interest / any actual/beneficial ownership in the subject
company.
Do not have any other material conflict of interest at the time of publication of the
research report
Have not received any compensation from the subject company in the past twelve
months
Have not managed or co-managed public offering of securities for the subject company.
Have not received any compensation for brokerage services or any products / services
or any compensation or other benefits from the subject company, nor engaged in
market making activity for the subject company
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