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Credit offtake up 16.1% as of end-December

 

The RBI projected credit offtake growth to be around 17%-18% this fiscal, as against the earlier estimate of 19%, while deposit growth has been pegged at 17%

Mumbai: Non-food credit offtake went up by just 16.1% to Rs44.99 lakh crore during the year ended 30 December 2011 reflecting the impact of the high interest rate regime, reports PTI.

The offtake stood at Rs38.75 lakh crore during the 12 months to 31 December 2010, the Reserve Bank of India (RBI) data shows.

Experts said the slowdown in credit growth is on account of the high interest rate regime that has been in place for over a year to rein in inflation.

The RBI has raised key lending rates by 350 basis points (bps) through 13 hikes since March 2010 to curb inflation, which has been above the 9% mark since December last year.

The rate of price rise was 9.11% in November.

Deposits rose to over Rs59.89 lakh crore during the 12-month period to 30 December 2011, from Rs51.31 lakh crore during the corresponding period to 31 December 2010. This translates into a growth of 16.7%.

In its first quarterly monetary policy review for FY11-12 in July, the RBI had said credit growth was likely to slow down as a result of the rate hikes.

It projected credit offtake growth to be around 17%-18% this fiscal, as against the earlier estimate of 19%, while deposit growth has been pegged at 17%.

During FY2010-11, bank credit offtake increased by 21.5%, while deposits grew by only 15.5%.

Indian industry has complained that the high interest rate regime has resulted in slowing down of investment and industrial growth.

Economic growth slowed to a nine-quarter low of 6.9% in the July-September period. In addition, industrial growth entered the negative trajectory in October, contracting by 5.1%.

 

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Deutsche pegs Sensex target at 18,000 by December

Restoring confidence in capital markets is likely to be the strongest starting point for the government in rebuilding the faith of corporate India, Deutsche Equities India strategist Abhay Laijawala said

Mumbai: Although the domestic equities market is down in the dumps now, Deutche Bank on Wednesday said it sees the Sensex offering robust 14% returns, scaling the 18,000 level, from the current lows, reports PTI.

“We are setting our year-end Sensex target at 18,000, implying a 14% return from current levels. At our target, the Sensex would trade at a PE multiple of 13.8 times, a slight discount of 3% to the average multiple at which the market has traded over past 15 years,” Deutsche Equities India strategist Abhay Laijawala said while releasing its India Equity Strategy 2012 Outlook here.

“With a near 19-month monetary tightening cycle expected to reverse in 2012, we believe the classical rate sensitives—banks (though the sector may have to cross the hump of bad loans in the near term) and real estate, together with infrastructure will be the key sectors driving the market in 2012,” Deutsche Equities India managing director Pratik Gupta said.

“We believe that the IT sector may provide investors with a strong hedge against continuing uncertainty in the domestic economy,” Mr Gupta added.

The markets may bottom earlier than expected in February-March if the Reserve Bank of India (RBI) reverses its tight policy stance in the January credit policy, Mr Laijawala said.

“March will be critical for the equity market as the clear direction will be visible. The forthcoming state elections will give the government the long-needed manoeuvrability to address many of the economic issues. We would also expect that the much-needed clarity on how the situation in Europe is likely to evolve will also be clearer by March,” Mr Laijawala said.

He pointed out that major worries for the domestic market are more international than domestic issues. “The continuation of policy paralysis, persistent inflation, and a severe crisis in Europe are key risks,” he said.

Restoring confidence in capital markets is likely to be the strongest starting point for the government in rebuilding the faith of corporate India, he said.

“We see equity investors at two ends of the expectations spectrum, with a dominant majority still nervous and negative on this market despite the precipitous fall and lower valuations,” Mr Laijawala said.

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