Stocks
Nifty, Sensex are on a strong uptrend – Monday closing report
Nifty has to stay above 7,600 for the rally to continue
 
We had mentioned in Friday’s closing report that Nifty, Sensex might drift higher subject to dips and that Nifty has to stay above 7,550 for the index to continue to rise. Following favourable global cues, the major indices in the Indian stock markets rallied and closed more than 1.3% higher than Friday’s close. The trends of the major indices in Monday’s trading are given in the table below:
 
 
Finance Minister Arun Jaitley on Sunday defended the government's decision to slash interest rates on PPF and national small savings, saying this will help transform the economy from a "sluggish" state to an "efficient" one.  "Now the interest rates have come down and the direction in which the country's economy is moving these days, we cannot have a situation where banks’ lending rates go down and the deposit rates are high. Both are inter-linked," Jaitley told reporters. "The country has to move towards lower interest rates in both areas. Similarly the interest on government securities has also come down in the last few months." The minister, who has come under attack for slashing interest rates, said earlier changes in interest rate used to be announced annually.Henceforth, as the interest rates fluctuate, it will be announced every quarter.
 
Demand for policy rate cut may be considerable, but given the central bank's inflation target, rate cut space is scant, and the Reserve Bank is likely to cut only 25 bps in the upcoming monetary policy, a Deutsche Bank report says. According to the global financial services major, with RBI sticking to its goal of maintaining 1.5%-2% average real interest rate, which along with an average CPI (consumer price index) inflation forecast of 5% for 2016-17 leaves little room for bringing the repo rate below 6.50%. "If RBI somehow cuts rates by 50 bps on April 5, which is not our base case scenario, probably the central bank will also signal an extended pause, and risks are that market will factor in that the rate cut cycle is over," Deutsche Bank said in a research note. 
 
Meanwhile, RBI Governor Raghuram Rajan on February 2 left the key interest rate unchanged, citing inflation risks amid growth concerns. The report further noted that "while we think RBI will cut only 25 bps in the upcoming monetary policy, we however do not completely rule out the possibility of further rate cuts in the second half of this year". Moreover, if growth may continue to surprise on the downside and inflation stays at the 5% level, the central bank may entertain a slightly lower real interest rate, which in turn "might open up room for a further 25-50 bps rate cut", it explained.
 
The Foreign Investment Promotion Board has granted approval to Japan's Nippon Life Insurance to increase its stake in Anil Ambani-led Reliance Life Insurance (RLI) to 49%, which will peg the valuation of the Indian company at $1.5 billion. Nippon Life will be investing an aggregate value of Rs.2,265 crore ($348 million) to acquire an additional 23% stake in Reliance Life to reach a 49% stake, a statement by the companies said. "In line with the new shareholding structure, the name of the company will also be changed to Reliance Nippon Life Insurance Company, post increase in stake," the statement added. "The transaction pegs Reliance Life Insurance's valuation at approximately Rs.10,000 crore ($1.5 billion), amongst the highest valuation for any Life Insurance company in the country." Once the transaction goes through, Nippon Life would have invested a total of Rs.8,630 crore ($1.3 billion) for acquiring 49% each in Reliance Life Insurance and Reliance Capital Asset Management. Reliance Capital closed at Rs373.90, up 1.89% on the BSE. The stock exchanges will remain shut on Thursday and Friday on account of Holi and Good Friday, respectively.
 
The top gainers and top losers of the major Indian indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 

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Do we have accurate data on banks?
Are banks only eager to show data that pleases the Finance Minister and the Prime Minister?
 
The Reserve Bank of India recently released the Basic Statistical Return (BSR) statistics for 2014-15. This, read with the Trend and Progress of Banking, reveals some interesting results. While the aggregate deposits amounted to Rs89.22 lakh crore, registering a growth of 12.1% in 2015 as against 13.4% in the previous year, the Pradhan Mantri Jan-Dhan Yojana (PMJDY) accounts swelled to 14.4 crore in 2015 constituting 17.4% increase in the group. 
 
The Economic Survey of 2016-17, on page 52 talking of JanDhan-Aadhaar-Mobile (JAM) mentioned that 12 crore accounts under Jan Dhan were opened in just ‘last year’ (Is it January-December or April-March, it is for us to figure). 
 

Chart 2.21 of the Trend and Progress of Banking in India however, confirms that the PMJDY accounts are the basic savings bank deposit accounts. Then read this statement on current account savings account (CASA) deposits in the Report.
 
“The growth in CASA deposits moderated due to decline in savings deposits that in turn got reflected in overall decline in deposit growth. Bank-group wise, PSBs recorded decline in CASA deposits while private banks (PVBs) and foreign banks (FBs) recorded higher growth during 2014-15.” The decline would have been more alarming but for Jan Dhan.
 
Banking outlets and basic SB deposit accounts as at Dec 31, 2015
 
Then the data on population group wise deposits and credit in the BSR 2015 shows that the rural savings deposits showed a steady increase in the number of accounts during the last three years while the semi-urban savings deposit accounts showed a marginal decline during 2014-15 compared to the previous year. Just during the year 14-15, the increase in rural and semi-urban areas amounting to about 14 crore accounts could be attributed to in majority the PMJDY.
 
GROWTH OF NUMBER OF SB DEPOSITS ACCOUNTS IN BANKING INDUSTRY FROM MARCH 2012 TO MARCH 2015
 
 
(Source: Statement 1.18 of Basic Statistics Returns of Scheduled Commercial Banks 2012 to 2015 of RBI)
 
Admitting that several accounts could be with zero-balance, the banks were supposed to open overdraft accounts after six months of operations. Data reveals that banks opened such accounts only in respect of 0.65% of the total number of accounts as at the end of December 2015.
   
The RBI seems to be content with the data submission and aggregation but not its correctness across the population groups and different schemes. Already there are wide ranging discussions on the actual position of NPAs versus that reported by the banks. In spite, of computerisation of records, it is strange that such data discrepancies should occur and banks are eager to project what they are not – particularly in the PSBs. 
 
Had it not been for the Prime Minister’s Jan Dhan Yojana, the performance in savings bank deposit accounts would have been far more disappointing. This is the only silver-lining in the dark clouds of NPAs.
 
The burden of the story is that the banks are eager to show performance that draws the attention of Finance Minister (FM) and the Prime Minister (PM) and the data is like a bikini – hides more than it reveals. Can India afford the luxury of such showmanship?
 
(Dr Yerram Raju Behara or Dr B Yerram Raju  is a former senior executive of SBI and an economist and risk management specialist. The views expressed in the article are his personal.)

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COMMENTS

Gopalakrishnan T V

1 year ago

Wait for March figures. All figures will look impressive. There will be deposit growth, advances growth and decline in NPAs. All banks will be showing profit and risks will be bear minimum on business front. Bankers would become eligible to draw productivity bonus and the Auditors will prepare the Balance sheet as the Chairman and his Executives Desire. The data collection and dissemination is an art In India and the reliability of data was doubted by none other than Dr Subba Rao the former Governor of RBI The window dressing of banks' balance sheet is a feature well established for decades but how the same art is repeated in a computerised environment is a mystery. The ground realities and the data produced by various institutions do not match is a fact and the policies based on erroneous data cannot produce any better result. Garbage in garbage out is what we experience.

SBI index foretells low growth
Bank credit to domestic export sector has suffered due to fall in external demand as is visible in major export sectors like textile, gems and jewellery leading to contraction in demand of credit
 
The yearly State Bank of India (SBI) Composite Index for March 2016 has declined below 50 and is at 49.5 (low decline), compared to last month index of 51.3 (low growth), portending low growth. 
 
"The good news is that the fortnightly data of all scheduled commercial banks (ASCB) indicates that credit off-take (YoY) has increased to 11.5% as on 4 March 2016, compared to last year growth of 9.8% on 6 March 2015. However, refinancing constitutes much of the credit growth, hence it may be difficult to say whether credit growth has picked up materially or in a sustained manner," the SBI said in its Ecowrap note.
 
 
"In particular," it said, "bank credit to domestic export sector has suffered due to fall in external demand as is visible in major export sectors like textile, gems and jewellery. This has led to contraction in demand of credit. Furthermore instances of dumping have made revival of certain sectors difficult, thus depressing the demand of credit. In case of pure intermediate goods sector like mining, the fall in commodity prices has dented margins in mining. At the current low levels of prices, it is difficult to market a low grade ore with higher extraction cost."
 
According to the SBI Ecowrap, the incremental lending has been mostly to the personal loan segment, especially housing, and also Mudra. The overall credit-deposit ratio is at 77.1 as on 4 March 2016 from 76.4% a year ago and 76.6% in 20 March 2015.

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COMMENTS

Sunil Anand

1 year ago

hopefully there's a brighter side, and there would be good growth in the future..

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