Higher credit growth is typically seen as a sign of better growth in India, but it is believed that the sudden surge reflects ongoing substitution from external borrowing into bank credit due to a weaker rupee, says Nomura in its research note
Credit growth in India has suddenly picked up. After falling through 2012, non-food credit growth has risen from a low of 13.8% y-o-y in April to 17% as of 23 August. This is according to a research note prepared by Nomura Financial Advisory and Securities (India) Private Limited. The non-food credit growth rate over the last six years is shown in the chart below:
But this does not give the complete picture. According to Nomura, higher credit growth is typically seen as a sign of better growth, but it is believed that the sudden surge reflects ongoing substitution from external borrowing into bank credit due to a weaker rupee. Money raised through commercial paper is being substituted by working capital from banks given higher short-term rates, and firms may be drawing down their credit lines in fear of a future liquidity squeeze.
This credit growth is a short-term observation. Nomura adds that given the ongoing demand destruction, it is unsustainable. This demand for credit will fall sharply once this substitution phase passes, concludes the research note.
While BSE has revised circuit limit of 463 companies, NSE has set 5% circuit limit for 394 companies, 10% for 146 companies and 20% for 895 companies
The BSE has revised the circuit limit of 463 stocks, including United Breweries Holdings, Reliance MediaWorks, Kingfisher Airlines and DB Realty, as part of the Exchange's surveillance action.
The revised circuit limit, which ensures that the price of a scrip cannot move upward or downward beyond a limit set for the day, is with effect from Friday.
The exchange has increased the circuit limit for some stocks, while it has been reduced for others.
BSE has raised the circuit limit of 409 scrips, including United Breweries, Reliance MediaWorks, Kingfisher Airlines, Essar Oil, UB Engineering, MMTC, and Venus Remedies, to 10% from 5%.
Besides, it has also increased the circuit filter level for companies such as Zuari Global, Kesoram Industries, Hindustan Copper, National Fertilizers to 20% from 10%.
For as many as 78 scrips, including Lifeline Drugs & Pharma, Mahindra Composites, and Venus Power Ventures (India), the circuit limit has been upped to 5% from 2%.
The exchange has, however, lowered the circuit filter for 64 companies. BSE has narrowed the limit for 28 companies to 5% from 20%, and reduced the filter for 16 firms from 20% to 10%.
In a separate circular, NSE has set 5% circuit limit for 394 companies, 10% for 146 companiess and 20% for 895 companies. However, there is no price band for 147 companies.
The companies that will have 5% price band include Emkay Global Financial Services, JVL Agro Industries, Lloyds Finance, Pipavav Defence, Piramal Life Sciences and Multi Commodity Exchange of India (MCX).
List of firms that will have 10% circuit limit include A2Z Maintenance & Engineering, DB Realty, Kingfisher Airlines, McDowell Holdings, Muthoot Finance, United Breweries, Venus Remedies.
Among the companies that would not attract any circuit limit are Adani Ports and Special Economic Zone, Bajaj Auto, Bharti Airtel, Bharat Heavy Electricals Ltd, Cipla, DLF, Hero MotoCorp, Hindalco Industries, ICICI Bank, Infosys, Maruti Suzuki India, United Spirits, and NTPC.
The no price band list also include Tata group firms —Tata Chemicals, Tata Communications, Tata Global Beverages, Tata Motors, Tata Power Company, Tata Steel and Tata Consultancy Services (TCS).