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This stock turned Rs 1 lakh into Rs 36,000 in three months

An investment of Rs 1 lakh in the large cap stock on February 20, 2020 would have decreased to Rs 36,217 on May 27

Aseem Thapliyal | June 2, 2020 | Updated 17:45 IST
This stock turned Rs 1 lakh into Rs 36,000 in three months
Share price of Bajaj Finance has fallen 32.37% during last one year and declined 44.59% since the beginning of this year

Bajaj Finance share has immensely reduced investor wealth in over three months. The large cap stock which hit all-time high of Rs 4,923 on February 20, 2020 fell to its 52-week low of Rs 1,783 on May 27, 2020. An investment of Rs 1 lakh in Bajaj Finance stock on February 20, 2020 would have decreased to Rs 36,217 on May 27 due to coronavirus lockdown and weak sentiment in global markets. Bajaj Finance share lost 57.89% since beginning of the year till May 27. Share price of Bajaj Finance fell 48% during the last one year till May 27.

However, the stock has gained 33%  in last four sessions as  Sensex and Nifty gained on effects of easing of lockdown from June 1. The stock gained 10% to Rs 2,374 intra day today and closed 8.64% or Rs 186 higher at Rs 2,346 on BSE. Share price of Bajaj Finance has fallen 32.37% during last one year and declined 44.59% since the beginning of this year. In one week, the stock has climbed 28.24%.

Bajaj Finance share fell from its all-time peak of Rs 4,923 on February 20, 2020 to Rs 2,266 on March 23 this year when Sensex and Nifty logged their worst one-day fall in history. The fall in the stock came after market came under pressure due to rising number of coronavirus cases in the world.

From 41,565 level on February 12, Sensex tumbled like pack of cards to 25,981 in nearly 1.5 months roiled by weak global market sentiment. On March 23, Sensex lost 3,934 points to 25,981 and Nifty closed 1,135 points lower at 7,610.

Sensex and Nifty crashed after the number of infected cases from coronavirus zoomed to 415 in the country. The government imposing lockdown in 75 districts to mitigate the threat of rising coronavirus cases also weakened market sentiment. The announcement of lockdown by PM Narendra Modi from March 24 to contain rising number of coronavirus cases hit the Bajaj Finance stock.

The stock of India's largest NBFC turned more volatile during lockdown and touched its 52-week low of Rs 1,783 on May 27. Investors dumped the stock of the company whose loan book comprises mostly of unsecured loans.

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On March 30, research firm Bernstein rated Bajaj Finance 'Underperform' with a target price of  Rs 1,740, implying 38% downside. Bernstein lowered Bajaj Finance's rating saying unsecured consumer finance business models would become challenging in the current pandemic environment.

"We expect FY'21E EPS to contract by 8% versus FY'20. We expect ROE to compress to 15% in FY2021 and recover slowly to 17% in FY2022," the brokerage firm said.

The stock fell 10% to touch an intraday low of Rs 2,291.85 in the same session.

The company engaged in the consumer finance business made a contingency provision of Rs 900 crore for Covid 19 in Q4 of last fiscal. 

It lost 10 productive days in Q4FY20 due to the coronavirus pandemic and the consequent lockdown which resulted in lower acquisition of nearly 1 million loan accounts and lower assets under management of around Rs 4,500 crore.

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The subsidiary of Bajaj Finserv reported a 19.38 per cent year-on-year (YoY) fall in net profit at Rs 948.10 crore for the quarter ended March 31.

The company made provisions of Rs 1,954 crore in Q4FY20 against Rs 409 crore in Q4FY19.

Bajaj Finance is a non-banking finance company that deals in consumer finance, small and medium enterprises, commercial lending and wealth management.

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