Why Shriram Finance Stock Has Declined in Recent Weeks

Vara Shiva Kumar Botchu
Aug 26
2 min read

Shriram Finance (SFL), India’s leading retail-focused NBFC, posted healthy first-quarter FY26 results with solid loan book growth and stable asset quality. Yet, its stock has slipped in the past few weeks, falling in line with broader financials. What explains this paradox—good fundamentals, but weak stock performance? The answer lies in a combination of global flows, margin optics, and sector-level caution rather than any fresh cracks in the company’s business model.

1. Macro Pressure: Global Flows and Market Shocks

August brought a shift in global investor sentiment. Foreign Portfolio Investors (FPIs) turned net sellers, and financials bore the brunt. On August 26, Indian markets slumped again after U.S. tariff news rattled global risk appetite, with financials dragging indices lower. As a large NBFC, Shriram Finance was caught in this risk-off trade.

Takeaway: When global risk appetite wobbles, Indian financials are the first to wear the bruise.

2. Q1 FY26: Solid Results, But Margins Still Under Watch

PAT: ₹2,156 crore (+9% YoY)
NII: ₹6,026 crore (+12.6% YoY)
AUM: ₹2.72 lakh crore (+16–17% YoY)
GNPA / NNPA: 4.53% / 2.57% (stable)

On paper, the results were strong. But context matters: the Street was still digesting Q4 FY25’s margin miss, where excess liquidity dragged net interest margins (NIM). In Q1, growth remained healthy, but margins did not yet show a clear upturn, and operating expenses ticked higher YoY. Investors saw stability, not acceleration—leaving the stock vulnerable when macro sentiment turned.

3. Sector Sentiment: Growth Okay, but Risks Loom

The broader NBFC narrative has shifted from unambiguous growth to cautious optimism. ICRA estimates FY25–26 NBFC credit growth at 13–15%, moderating from 17% previously. Analysts also highlight pressure on margins and asset quality in a high-cost environment. In this context, even good Q1 results failed to re-rate the stock, as investors prefer a “show me” approach before re-entering aggressively.

4. Ownership & Technicals

FII holding in SFL slipped from 53.99% to 53.02% in the June quarter, even as domestic mutual funds added exposure. On the charts, the stock slipped below key moving averages last week, reinforcing short-term bearish sentiment.

5. Regulatory Backdrop

Recent regulatory developments impacting NBFCs have been driven largely by the RBI—such as digital lending norms, project finance exposure rules, and AIF caps. While none are directly negative for Shriram Finance, they do keep the sector under a sharper compliance lens. Adding to the noise, SFL received a small RBI penalty (₹2.7 lakh) in July on digital-lending directions—immaterial financially, but not the headline investors like in a nervous tape.

Company Signals Remain Positive

Despite market worries, Shriram Finance’s own disclosures and investor presentations point to a resilient franchise:

Disbursements grew +13% YoY in Q1.
Management guides credit costs below 2% for FY26.
Funding diversification continues, with recent ECB and social-loan raises bolstering liquidity.
The business mix in CVs, used-CVs, and MSMEs remains a core strength.