If you invested in this Rakesh Jhunjhunwala stock, then you have gained 8% today; Here’s why

As usual there was no relief seen in Indian markets today as well with Sensex and Nifty 50 struggling to recover through the day. Sensex index was struggling to survive near 36,000-mark, as it was trading at 36,003.61 down by 528.90 points or 1.45%, while Nifty 50 cracked below 143.15 points or 1.30% trading at 10,865.15 at around 1511 hours. On Sensex, the midcap stocks were among the worst performers, however, that was not the case for this ace investor Rakesh Jhunjhunwala linked stock. The Dalal Street linked NBFC stock turned out to be a major gainer today. 

There is no introduction needed for Jhunjhunwala, as many refer him as 'the Warren Buffett of India'. If you follow Jhunjhunwala’s technique of trading, and have invested in Edelweiss Financial Services, then you have gained over 8% today despite markets bleeding. 

Just few hours of before the trading session could end, Edelweiss was trading at Rs 193.35 per piece up by Rs 6.75 or 3.62%. However, so far, the company has touched an intraday high of Rs 202.40 per piece taking the gains by 8.46% compared to previous trading session. 

Edelweiss gained after the company released its liquidity position and outlook on Monday. The markets were closed on Tuesday on the back Gandhi Jayanti celebrations. 

Edelweiss maintained a Liquidity Cushion of ~9-10% of balance sheet at all points of time. Current liquidity cushion stands at Rs 5,400 crores. 

Further, medium and long term sources of funds are upwards of 68% of total balance sheet. 

The company said, “Adequate Liquidity Cushion currently positions us to meet all contractual liabilities over next 6 months even without roll-overs.”

Talking about growth, Edelweiss said, “Short-term funding is seeing tightness, expected to improve in coming months. Demand for credit is steady, however, growth may taper down by around 10 -12 percentage points for the market; NIMs likely to see an expansion.”

According to Edelweiss, reduction in low-yielding High Quality Liquid Assets (HQLA) will have positive impact on RoA. High RoA business is primarily long-term in nature and is expected to pick up in some time. 

“Our diversified model will help us navigate through the short-term challenges. Tail-wind of ARC resolutions will help PAT growth. ” said Edelweiss. 

Lastly, it reiterated, “We are currently not experiencing any deterioration in asset quality.”

NBFCs liquidity position has taken a hit since the time the Mumbai-based Infrastructure Leasing & Financial Services (IL&FS) crisis has come into limelight. IL&FS has turned into a defaulter on a few payments and failed to service its commercial papers on due date. In other words, IL&FS does not have any cash to fall back on to keep up with its repayments. 

This led to massive beating in NBFC and Housing Finance Companies (HFC) stocks in last week. 

However, looks like Edelweiss is better positioned on markets. 

Jhunjhunwala holds about 1.08% in Edelweiss which are worth Rs 192.5 crore.