The dynamics between NBFCs and banks, and hence cautious investors:

NBFCs and Banks: An Overview
Non-Banking Finance Companies (NBFCs) tend to have their shares perform better than those of regular banks, particularly with market uptrends. This is mostly due to the fact that NBFCs are subject to fewer regulatory restrictions. As opposed to banks, they are not required to participate in priority sector lending or hold statutory liquidity ratios (SLR) and cash reserve ratios (CRR). With greater leeway, NBFCs are able to use more of their capital for lending and lend at higher interest rates, which can improve their profitability.
Market Behavior and Risk Perception
In a bull market, investors tend to favor companies that offer unsecured loans, often overlooking or downplaying any negative news related to non-performing assets (NPAs). The focus shifts to growth and higher returns.
But the mood turns almost reversed sharply during a bear market. Under such times, all negative news, especially related to NPAs, is given close scrutiny and reflected sharply in stock prices. The whole banking industry is more risk-averse, and those companies engaged in unsecured loans are penalized more severely than those dealing in secured loans.