Bajaj Finance Stock Plunges 7% After Cutting FY26 Guidance

Introduction: A Sharp Market Reversal

Shares of Bajaj Finance experienced a significant sell-off on November 11, 2025, tumbling as much as 7% despite the company posting a strong 21.9% year-on-year rise in its second-quarter net profit. The sharp decline was triggered by a downward revision in the company's growth guidance for the fiscal year 2026, signaling to investors that future performance may face headwinds. This development overshadowed the otherwise healthy quarterly results, leading to a notable drop in investor confidence and prompting downgrades from several brokerage firms.

How the Trading Day Unfolded

On Tuesday, November 11, 2025, Bajaj Finance's stock opened to immediate selling pressure. The share price plunged 7.1% during intraday trading to hit a low of ₹1,008 per share on the BSE. While it recouped some losses, the stock closed the day 7.38% lower at ₹1,005.35. This steep fall contrasted with the broader market, as the benchmark BSE Sensex index saw only a minor dip of 0.25% during the same period. The negative sentiment also affected its parent company, Bajaj Finserv, whose shares fell by 6.5% intraday. The heavy trading volume indicated a widespread investor exit driven by concerns over the company's future growth trajectory.

Strong Q2 Results Overlooked

Ironically, the market's harsh reaction came on the back of a robust financial report for the second quarter of FY26. The non-banking financial company (NBFC) demonstrated solid performance across key metrics. Its consolidated net profit grew by 21.9% year-on-year to reach ₹4,875 crore. Net Interest Income (NII) also saw a healthy increase of 22% to ₹10,785 crore. The company's Assets Under Management (AUM) expanded by 24% year-on-year, reaching ₹4,62,250 crore, with a sequential AUM growth of approximately ₹21,000 crore. Furthermore, new loans booked during the quarter increased by 26% to 12.17 million.

The Core Concern: A Trimmed Outlook

The primary catalyst for the stock's decline was the management's decision to lower its AUM growth guidance for FY26. The company adjusted its forecast to a range of 22-23%, a notable reduction from the 23-24% guided at the end of the previous quarter and the 24-25% projected at the beginning of the fiscal year. Management attributed this cautious outlook to two main factors: heightened competition in the mortgage segment, which constitutes 32% of its total AUM, and a deliberate strategy of risk containment in its MSME lending portfolio, which accounts for 12% of AUM. This revision signaled that the high-growth phase investors had become accustomed to might be moderating.

Asset Quality and Rising Credit Costs

Adding to investor concerns were signs of deteriorating asset quality. During the quarter, Bajaj Finance's Gross Non-Performing Assets (NPA) ratio widened by 21 basis points sequentially to 1.24%. Similarly, the Net NPA ratio increased by 10 basis points to 0.60%. While the company's capital adequacy ratio remained strong at 21.33%, the uptick in NPAs, particularly from the MSME and two- and three-wheeler loan segments, was a point of caution. Consequently, the management guided that credit costs for FY26 would likely be at the upper end of its projected 1.85-1.95% range, indicating higher provisions for bad loans.

Analyst Reactions and Downgrades

The revised guidance prompted swift reactions from market analysts, with several brokerages downgrading the stock and adjusting their price targets. Emkay Global downgraded its rating on Bajaj Finance from 'Add' to 'reduce' and cut its target price to ₹1,000 per share. Analysts at Emkay expressed concern that moderating growth and intensifying competition could compress the premium valuation multiple the company has historically enjoyed. JM Financial Institutional Securities also downgraded the stock from 'Buy' to 'Add', although it raised its target price to ₹1,140. The firm lowered its earnings per share (EPS) estimates for FY26 and FY27 to factor in the reduced guidance. Motilal Oswal Financial Services maintained its 'Neutral' rating but increased its target price to ₹1,160, acknowledging the near-term pressures on growth and profitability.

Conclusion: A Shift in Investor Perception

The sharp fall in Bajaj Finance's share price on November 11, 2025, serves as a clear example of how forward-looking guidance can outweigh strong current performance in the stock market. While the company's Q2 earnings were robust, the decision to lower its AUM growth forecast for the third time in a year raised significant concerns about sustainable growth and competitive pressures. Investors will now be closely monitoring the company's ability to navigate the competitive landscape, manage its asset quality, and control credit costs in the upcoming quarters to justify its premium valuation.