Discover the secrets of predicting stock moves with a powerful blend of fundamental analysis and Elliott Wave Theory-based technical insights!
- FUNDAMENTAL ANALYSIS
- TECHNICAL ANALYSIS
FUNDAMENTAL ANALYSIS
Bajaj Finance is one of the largest NBFCs financing retail assets in
India. It has a strong market position in financing consumer durables and two—and three-wheelers, underpinning its reach in the Indian retail market. In
addition, the company consistently maintains above-average profitability. Bajaj Finance showed strong growth in the December 2024
quarter.
Strong Financial Growth:
· Net interest income grew by 23% to ₹9,382 crore compared to
last year.
· Profit after tax increased by 18% to ₹4,308 crore.
Customer and Loan Growth:
· Bajaj Finance added 5.03 million new customers in Q3 FY25,
the highest ever for a quarter.
· The total customer base reached 97.12 million, growing 21%
year-on-year.
· New loans booked were 12.06 million, a jump of 22% from the
previous year.
Assets and Market Position:
· Assets under management (AUM) grew by 28%, reaching ₹3.98
lakh crore.
· Bajaj Finance is a leader in financing consumer goods and
two- and three-wheelers in India.
Positive Rating Outlook:
· S&P Global Ratings revised the company’s outlook from
"stable" to "positive," expecting strong performance due to
better regulations and strong market conditions.
Financial Strength:
· Return on Equity (ROE) is 22.1%, showing efficient profit
generation.
· Debt-to-equity ratio is 3.74, indicating leveraged growth,
but the company has good liquidity with a current ratio of 2.39.
·
Strong market position in consumer durables and
vehicle financing
Leading NBFC in India for
retail assets expected to grow faster than industry (25-27%) · Any strict
regulations or policy changes by the Reserve Bank of India (RBI) affecting
NBFCs can lead to higher compliance costs or limitations on lending practices.
· An increase in NPAs indicates that more borrowers struggle to repay their loans, which can hurt profitability.
· If India's economy slows down, consumer spending and loan
demand may decrease, impacting Bajaj Finance’s growth.
· If RBI hikes interest rates, borrowing costs for Bajaj
Finance may rise, affecting profit margins.
· As a listed company with a high valuation, any negative
sentiment in the stock market can lead to a sharp decline in its share price.
Bajaj
Finance is a strong, growing company with a solid market presence. The stock
may seem expensive due to its high P/E ratio of 33.9.
TECHNICAL ANALYSIS
 |
| Figure 1 |
The
quarterly chart of Bajaj Finance (Figure 1) reveals a remarkable long-term uptrend since
its IPO in 1995, culminating in an all-time high of ₹9,260 in March 2025.
Analyzing through the lens of Elliott Wave Theory, it becomes evident that this
impressive rally has encountered two significant corrective phases. The first
major correction occurred between 2019 and 2020, driving the price down to
₹1,783. A subsequent correction unfolded from 2022 to 2023, bringing the stock
down to ₹5,220. In the initial quarter of 2025, the formation of a strong
bullish candle suggests a potential resumption of the larger trend. To gain a
deeper understanding, we will apply Elliott Wave analysis to explore the
structural developments following these critical corrections and assess the
stock's potential trajectory.
 |
| Figure 2 |
The chart illustrates (Figure 2) a well-defined five-wave impulsive structure in
Bajaj Finance's long-term uptrend, with corrections in Waves 2 and 4 aligning
with Elliott Wave principles. The entire bull cycle is labelled as Waves 1, 2,
3, 4, and 5 (marked in red). At this stage, the completion of Wave 5 suggests
that the impulsive phase may be concluding. According to Elliott Wave theory, a
corrective phase (likely an A-B-C structure) is expected to follow. However,
confirmation of this transition requires further analysis, as the
characteristics of Wave 5 need to be examined to determine whether an extended
move or truncation is in play.
 |
| Figure 3 |
 |
| Figure 4 |
Following Elliott Wave Theory, an impulsive wave unfolds (Figure 3 & 4) in five distinct
sub-waves, driving the trend in the primary direction. In the given analysis,
Wave 1 (marked in red) is composed of five sub-waves labelled I, II, III, IV,
and V (in blue), signifying a completed impulsive sequence. Similarly, Wave 3
(in red) exhibits its own five-wave subdivision (1, 2, 3, 4, 5 in green),
confirming its impulsive nature. Conversely, Wave 4 (in red) is a corrective
phase and adheres to the standard three-wave structure, labelled A, B, and C
(in red), reflecting a typical corrective pattern before the resumption of the
primary trend.
 |
| Figure 5 |
On
the daily chart (Figure 5), Wave 5 (in red) has developed as an ending diagonal,
characterized by its five distinct sub-waves (A, B, C, D, and E in violet).
This structure adheres to the classic traits of an ending diagonal, where price
action is confined within converging trendlines, indicating a weakening
momentum as the trend approaches exhaustion.
 |
| Figure 6 |
 |
| Figure 7 |
In line with Elliott Wave
principles, an ending diagonal consists of five sub-waves, following a
(3-3-3-3-3) structure, where each wave subdivides into three smaller waves. In
the provided charts (Figure 6), the E-leg of the ending diagonal (marked in violet) adheres
to this rule, breaking down into three distinct sub-waves: (A), (B), and (C)
(marked in green). A Fibonacci extension tool reveals that wave (C) has
extended to 223.6% of wave (A) (Figure 7), a typical target in extended wave structures.
The key focus now is to determine whether wave (C) has reached completion or if
further upside movement remains possible before a reversal.
 |
| Figure 8 |
In Elliott Wave theory,
corrective market structures typically unfold in three waves: A, B, and C. The
C wave is particularly significant as it follows an impulsive five-wave
sequence, providing clarity on market direction. The attached charts (Figure 8) depict this
unfolding C wave, where the five sub-waves are labelled numerically as 1, 2, 3,
4, and 5 in black.
Notably, the first wave (wave
1) exhibits a leading diagonal formation, a specific wave pattern indicating
potential market reversal or continuation. At present, the fifth wave remains
incomplete, suggesting the corrective structure is still developing.
Using the Fibonacci Extension
tool, we can estimate the target price for the normal fifth wave. By measuring
61.8% of the distance between points 0 and 3, the projected price target is
calculated at Rs 9,386.
 |
| Figure 9 |
The projected fifth wave target of Rs 9,386 suggests (Figure 9) a potential market reversal in alignment with Elliott Wave principles.
The fifth wave in the higher
time frame will complete its full five-wave structure (in red colour),
signalling the end of the current market impulse. Once this five-wave sequence
concludes, the theory predicts the onset of a larger corrective wave,
potentially indicating a significant trend change.
The potential reversal is
further supported by:
·
The projected price target at Rs 9,386 i.e.
61.8% Fibonacci level.
·
Relative Strength Index (RSI) divergence, which
typically precedes market reversals
As illustrated by the blue
arrow, the anticipated market movement suggests a transition from the current
impulse wave to a broader corrective phase. This transition represents a
critical moment in the market's cyclical behaviour, where trend momentum is
expected to diminish and potentially reverse direction.
 |
| Figure 10 |
Traders should monitor price action closely as a reversal confirmation could present a significant shift in market sentiment.
Disclaimer:
I am not a SEBI-registered financial advisor. The analysis and views shared
here are purely for educational and informational purposes and should not be
considered as financial advice or investment recommendations. Trading and
investing in the stock market carry a high level of risk, and past performance
is not indicative of future results. Readers are strongly encouraged to consult
with a certified financial advisor or SEBI-registered professional before
making any financial decisions. I am not responsible for any losses incurred
based on the information provided.