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We also analyse the market’s performance on Tuesday to understand what lies in store for the market.
REC Ltd.
Current price: ₹364
Target price: Rs450 in 12 months
Stop-loss: ₹320
Why it’s recommended:Rural Electrification Corporation Limited (REC Ltd.), established in 1969, is a leading ‘Maharatna’ enterprise, classified as an infrastructure financing company, a public financial institution, and a non-banking financial company (NBFC). REC provides financing across the the power sector, including generation, transmission, distribution, and renewable energy. It also supports emerging technologies such as electric vehicles, battery storage, pumped storage, green hydrogen, and green ammonia.
REC now also finances non-power infrastructure projects such as roads, expressways, metro systems, airports, ports, IT and communication networks, and electro-mechanical (E&M) projects related to industries like steel and oil refineries.
In FY25 it saw 18% year-on-year growth in disbursements to ₹1.91 trillion up from ₹1.61 trillion in FY24. The company achieved its highest-ever loan book at ₹5.67 trillion (11% growth YoY) and recorded a record profit of ₹15,713 crore (12% YoY growth). Net interest income surged 27% to ₹19,878 crore, and asset quality continued to improve. Total revenue climbed 19% YoY to ₹55,980 crore. Shareholders received ₹18 per share in dividends, a 180% increase, with earnings per share (EPS) coming in at ₹59.55 for FY25.
The company’s net interest margin (NIM) improved by 6 basis points year-over-year to 3.63% in FY25 and is projected to stay between 3.5% and 3.75% in FY26. REC is targeting a loan book of ₹10 trillion by FY30, growing at a CAGR of 12%. It anticipates disbursements of ₹2-2.1 trillion in FY26, with prepayments expected to remain around ₹1 trillion annually. Transmission and smart metering projects represent a ₹1.1 trillion opportunity over the next 2-3 years.
In Q1 FY26, the company recorded its highest-ever quarterly disbursements, which increased by 36% YoY to ₹59,508 crore. Loan book grew at a rate of 10% YoY to ₹5.84 trillion. The company has reported robust performance over the period, with total income increasing by 13% YoY to ₹14,734 crore, up from ₹13,037 crore in Q1 FY25.
Net interest income grew by 17% YoY to ₹5,247 crore, and NIM improved to 3.74%. Net worth increased by 10% YoY to ₹79,688 crore. Net profit rose to ₹4,451 crore, up by 29% YoY.
With a current book value of ₹58,000 crore, REC aims to invest ₹3 trillion in renewable energy by 2030. Additionally, the revolving bill payment facility, sanctioned for five years, is expected to result in disbursements of ₹80,000- ₹90,000 crore in FY26. With EPC contracts completed, disbursements are expected to rise in the coming year.
Risk factors: REC faces exposure to financially weak clients, especially state-owned power companies, which introduces credit risk.As of Q1 FY26, 87% of its total loan book was concentrated among state/joint sector borrowers, creating concentration risk.The company is also vulnerable to regulatory changes, shifts in customer preferences, and evolving technologies.
Bajaj Housing Finance Ltd
Current price: ₹112
Target price: ₹150in 16-24 months
Stop-loss: ₹90
Why it’s recommended:Bajaj Housing Finance Limited (BHFL), a non-deposit-taking housing finance company registered with the National Housing Bank (NHB), was established in 2015 and began lending operations in 2017. BHFL provides various financing solutions, including home loans, loans against property, lease rental discounting, and developer funding, with a strategic focus on maintaining a low-risk, medium-return profile.
In FY25, BHFL surpassed an AUM of ₹1 trillion, hitting ₹1.14 trillion. Of this, 56.2% was from home loans, 10.7% from loans against property, 19.1% from lease rental discounting, 12.5% from developer finance, and 1.5% from other sources.The company has expanded its presence to 217 branches across 175 locations in 21 states.
Since FY18, BHFL’s AUM has seen a remarkable CAGR of 64%. In FY25, the company reported a total income of ₹9,576 crore, a 25.7% increase year-over-year. Loan disbursements rose to ₹14,254 crore from ₹11,393 crore, marking a 25% growth. Profit after tax (PAT) reached ₹2,163 crore, also up 25% YoY.
BHFL has consistently reduced its operating expense (OPEX) ratio, dropping from 74.6% in FY18 to 20.8% in FY25, while significantly improving return metrics. Return on equity (ROE) grew to 13.4% from 7.8% in FY21. Asset quality remains strong, with gross NPAs at just 0.11% and a provision coverage ratio of 60% as of FY25. Net interest margin (NIM) was stable at 4% in Q4FY25.
In Q1 FY26, the AUM improved by 24%, standing at ₹120,420 crore. Lower AUM growth was caused by the real estate market’s slowdown and fiercely competitive pricing, which increases attrition. BHFL witnessed a disbursement growth of 22% of ₹14,651 crore from ₹12,004 crore during Q1 FY25, with 56% coming from home loans. PAT grew by 21% to ₹583 crore with RoA of 2.3% and RoE of 11.6%.
With GNPA at 0.30%, NNPA at 0.13%, and annualised credit cost at 0.16%, asset quality stayed strong. Opex to NTI stayed constant at 21.2% in Q1 FY26 compared to 21.0% in Q1 FY25 in terms of operating efficiencies. PBC was 61.71%, which is lower than the 60% regulation threshold.
Management has guided for 24-26% AUM growth in the medium term, with expectations to bring down the OPEX ratio further to 14-15%. Gross NPA is projected to remain steady in the 40-60 basis point range. ROE is anticipated to improve to 13-15%. As of FY25, BHFL’s leverage stood at 5.2 times, with medium-term plans to increase it to 7-8 times. The debt-to-equity ratio was 4.1 times. To fuel future expansion, the company plans to invest significantly in Strategic Business Units (SBUs) and expand further into non-metro markets during FY26.
Risk factors:BHFL operates in a highly competitive housing finance sector, particularly in the affordable housing space. It risks margin compression and potential loss of market share if it needs to lower interest rates to remain competitive. Additionally, it faces geographic concentration risk, as its business is heavily focused in four states and the New Delhi region.
How the market performed on Tuesday
Tuesday’s trading session opened on a weak note and ended in negative territory, erasing the brief recovery seen on Monday. The Nifty 50 began the day lower at 24,899.50, down 68.25 points from the previous close of 24,967.75, and continued its decline to close at 24,712.0, marking a drop of 255.7 points or 1.02%.
On the daily chart, the index closed below its 20-day and 50-day EMAs but remained above the 100-day and 200-day EMAs. The BSE Sensex followed a similar downward path, opening at 81,377.39 and ending at 80,786.54, with a loss of 849.37 points or 1.04%. Momentum indicators showed weakening market sentiment, with the RSI for the Nifty at 45.92 and for the Sensex at 44.78, both comfortably below the overbought mark of 70.
Nifty Bank also saw a steep decline, closing at 54,450.45, down -688.85 points or -1.25%. The overall bearish trend was largely driven by concerns over U.S. trade policy, especially after the U.S. released a draft proposal to impose up to 50% tariffs on Indian goods, scheduled to take effect on August 27.
Most sectoral indices ended in the red, with a few exceptions. The Nifty FMCG Index emerged as the top gainer, rising 0.91% to 56,187, led by Britannia Industries Ltd., which jumped 3.9%, followed by Hindustan Unilever Ltd. (up 2.3%) and ITC Ltd. (up 1.0%). The Nifty MNC Index also saw modest gains, closing at 29,518.2, up 0.34%, supported by stocks like Britannia, HUL, Linde India Ltd, and Maruti Suzuki India Ltd.
On the downside, the Nifty Realty Index was the worst performer, falling -2.24% to 895.95, with Godrej Properties Ltd down 3%, Brigade Enterprises Ltd down 2.5%, and Prestige Estates Projects Ltd down 2.4%. The Nifty Smallcap 50 Index also fell sharply, losing -183.95 points, or -2.14%, to close at 8,428.7. Key losers in this space included KFin Technologies Ltd, Firstsource Solutions, and Piramal Enterprises, with losses of up to 5%.
Asian markets also ended mostly lower. Hong Kong’s Hang Seng Index fell -1.18% to 25,524.92, while the Shanghai Composite declined 0.39% to 3,868.38. Japan’s Nikkei 225 dropped 0.97% to 42,394.4, and South Korea’s KOSPI Index fell 0.95% to 3,179.36.
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