Bajaj Finance share price falls 10% on downgrade by Bernstein

Bajaj Finance shares fell 10% on Monday to trade after its rating was downgraded to 'underperform' by Bernstein.

Bernstein rated Bajaj Finance 'Underperform' with a target price of  Rs 1740, implying 38% downside. The research firm said the rating downgrade was is in line with the firm's view, that unsecured consumer finance business models would become challenging in the current pandemic environment.

Following the rating downgrade, shares of Bajaj Finance opened with a loss of 5.79% and later fell 10% to touch an intraday low of Rs 2,291.85. From the day's low, the share price of Bajaj Finance currently trades 186 points higher to its 52-week low of Rs 2,105, recorded on March 24, 2020.

On Friday, the stock fell 247 points or 8.8 per cent to 2,546.45  against the Thursday's close of Rs 2,794.35 on BSE. The stock has fallen 16.17% in the last 2 days.

Bajaj Finance stock has lost 23% in one month and 45% since the beginning of the year.

The stock trades higher than 5-day moving averages but lower than 20, 50, 100 and 200-day moving averages.

With more volume trading close to low price, 1.43 lakh and 30.8 lakh shares were changing hands on BSE and NSE. Data on BSE suggested 82% of sellers offering the stock as against 18% buyers bidding.

As per Bernstein, it is uncertain to project how long the physical restrictions from the government would last beyond the 21-days imposed lockdown at the current early stage of COVID19 outbreak in India.

Bernstein added that it would be conservative to assume that first quarter of FY2021 would be a near-complete economic freeze and a crawling recovery is expected to post that.

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

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