Rating
agency Moody’s revising its outlook on India’s banking to “stable” from “negative
“ and the four-month fastest clip for the country’s eight infrastructure
industries are considered yet another positives
for macro picture.
By that
logic, the investors should have batted for the Indian equities irrespective of
the fact the global cues led by continuous troubles in China keep dragging markets all through Asia, Europe and the US..
But as the seasoned analysts know by now that barring exceptional
circumstances, no single market moves in
a contrarian direction. In any case, not many expect the Indian equities to be
great themes at least for the next two –three quarters. So, like rest of the
markets, shares will stay subdued in the
Indian bourses as well.
Moody’s
has given the correct assessment about the bad quality that Indian state owned
banks hold , estimated at USD 50 billion . What it has said is that while the
assets quality will continue to rot , the pace at which the rot continues has
slowed. That is what has made Moody’s change its assessment from ‘negative’ to ‘
stable’.
At the
cost of sounding negative, the issue is that the Indian banking system remains
vulnerable to a huge amount of non-performing assets. One of the reasons for
the slow pace of the NPA should also be that the credit growth has also come
down tremendously. Banks are lending far
less, or the other way of saying could be there is not much demand for credit.
Moody’s assessment should be taken in that perspective as well.
The
headline is that growth of Indian infrastructure industries has reached a four
month high in September. But what is the four-month high: Mere 3.2 per cent and
how it has come about ?. Of the eight
such sectors only two have done well : fertilizer and electricity. In fact,
thanks to a double digit growth in electricity generation that the aggregate figure
has shown this improvement. Otherwise, majority of the infra sectors – be it
coal, steel, cement, natural gas remain in bad shape. There is hardly any
growth….de growth in some of them.
See
table below:
GROWTH RATES (in %)
| |||||||||
Sector
|
Coal
|
Crude Oil
|
Natural Gas
|
Refinery Products
|
Fertilizers
|
Steel
|
Cement
|
Electricity
|
Overall Index
|
Weight
|
4.379
|
5.216
|
1.708
|
5.939
|
1.254
|
6.684
|
2.406
|
10.316
|
37.903
|
Sep-14
|
7.6
|
-1.1
|
-5.8
|
-2.6
|
-11.6
|
6.6
|
3.7
|
3.9
|
2.6
|
Oct-14
|
16.2
|
1.0
|
-4.2
|
4.2
|
-7.0
|
2.3
|
-1.0
|
13.2
|
6.3
|
Nov-14
|
14.5
|
-0.1
|
-2.9
|
8.1
|
-2.8
|
1.3
|
11.3
|
10.2
|
6.7
|
Dec-14
|
7.5
|
-1.4
|
-3.5
|
6.1
|
-1.6
|
-2.4
|
3.8
|
3.7
|
2.4
|
Jan-15
|
1.7
|
-2.3
|
-6.6
|
4.7
|
7.1
|
1.6
|
0.5
|
2.7
|
1.8
|
Feb-15
|
11.6
|
-1.9
|
-8.1
|
-1.0
|
-0.4
|
-4.4
|
2.7
|
5.2
|
1.4
|
Mar-15
|
6.0
|
1.7
|
-1.5
|
-1.3
|
5.2
|
-4.4
|
-4.2
|
1.7
|
-0.1
|
Apr-15
|
7.9
|
-2.7
|
-3.6
|
-2.9
|
0.0
|
0.6
|
-2.4
|
-1.1
|
-0.4
|
May-15
|
7.8
|
0.8
|
-3.1
|
7.9
|
1.3
|
2.6
|
2.6
|
5.5
|
4.4
|
Jun-15
|
6.3
|
-0.7
|
-5.9
|
7.5
|
5.8
|
4.9
|
2.6
|
0.2
|
3.0
|
Jul-15
|
0.3
|
-0.4
|
-4.4
|
2.9
|
8.6
|
-2.6
|
1.3
|
3.5
|
1.1
|
Aug-15
|
0.4
|
5.6
|
3.7
|
5.8
|
12.59
|
-5.9
|
5.4
|
5.6
|
2.6
|
Sep-15
|
1.9
|
-0.1
|
0.9
|
0.5
|
18.1
|
-2.5
|
-1.5
|
10.8
|
3.2
|
Source: PIB, GOI
On its part, the Indian government
is trying its best to retain the investor confidence . Revenue Secretary in the
Finance Ministry Hasmukh Adhia has indicated that the promised cut in the corporate
tax from 30 per cent to 25 per cent could materialize at earlier date than four
years , set earlier by Finance Minister Arun Jaitley.
Pic courtesy: SBI
