Morgan Stanley is ‘overweight’ on HDFC Life Insurance Co. and SBI Life Insurance Co. because it believes that large-cap insurers’ new business value growth is healthy and at an attractive valuation. The investment banker is ‘equal-weight’ on ICICI Prudential Life Insurance Co. The receding regulatory risk also adds to the positives for the mentioned stocks.

In the large-cap space, Morgan Stanley is also ‘overweight’ on Bajaj Finance Ltd. and Shriram Finance Ltd. The latter is a preferred pick in the large-cap non-banking financial space because of its healthy growth and return on equity at valuation that has scope to re-rate equally over time. It has ‘equal-weight’ on Cholamandalam Investment and Finance Company Ltd. There’s downside risk for SBI Cards And Payment Services Ltd.

In mid and small-cap space, Morgan Stanley is ‘overweight’ on Aditya Birla Capital Ltd. because of its cheap valuation and unsecured loan turnaround. It remains ‘underweight’ on L&T Finance as micro finance’s profitability is expected to come under pressure.

The brokerage thinks that small-cap housing financiers will likely offer better risk-reward ratios for patient investors. It expects outsized returns and multi-year compounding for PNB Housing Finance Ltd., Home First Finance Co. and Aptus Value Housing Finance Ltd. Morgan Stanley is ‘overweight’ on all of these stocks. It has ‘equal-weight’ on Aavas Financiers Ltd.

According to Morgan Stanley, Can Fin Homes Ltd. and ICICI Lombard General Insurance Ltd. are ‘interesting’ stocks for investors who are in search of quality, prefer low risk, and want strong return on equity businesses at lower valuations. However, these stocks are good in case investors are willing to look past slow topline growth, the brokerage said.

Morgan Stanley is ‘underweight’ on PB Fintech Ltd. and Multi Commodity Exchange of India Ltd. — these stocks are last year’s expensive themes, the brokerage said. It sees further de-rating for them going forward. In this space, Morgan Stanley remains ‘equal-weight’ on HDFC Asset Management Co.

Investors have adopted a barbell approach in 2025; they are buying large lenders and unsecured credit recovery plays on the other side. Morgan Stanley prefers to be selective in the credit recovery space. It expects limited accretion to earnings from lower rates. Their forecasts are lower than sell-side consensus.

After the recent rally, Morgan Stanley expects limited upside and downside potential in most large-cap non-banking financial companies. For the unsecured credit turnaround story, investors have positioned themselves very early. In the microfinance and credit card space, Morgan Stanley expects delays in cost reduction, especially for credit cards. Personal consumption loans are well-placed to deliver faster improvement in credit costs and pre-provisional operating margin.

. Read more on Markets by NDTV Profit.According to Morgan Stanley, Can Fin Homes Ltd. and ICICI Lombard General Insurance Ltd. are ‘interesting’ stocks for investors who are in search of quality, prefer low risk.  Read MoreMarkets, Notifications, Business 

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