Abundant liquidity at Banks: Ind-Ra!
India Ratings and Research (Ind-Ra) has published the November 2019 edition of its credit market tracker. The report comments on the systemic and market liquidity with insights on interest rates transmission, short-term yields and aggregate mutual fund sectoral debt exposure. The tracker highlights the monthly changes in liquidity of the banking system, and trends in debt and money markets.
Key Highlights of the credit market tracker focuses on, Liquidity and Capital Market Performance, The banking system has exhibited abundant liquidity since July 2019, as evident from the fact that the Reserve Bank of India’s (RBI) absorption amount crossed INR2.5 trillion at end-October 2019.
The cash in circulation (CIC) during the festive season in 2019 registered growth of 3.3% as compared with the average growth of 3.5% recorded during festive seasons over 2016-2018. The comparison is made by calculating changes in CIC from the start of the festive season (Dussera) to its end (Diwali). This corroborates that the demand for currency during festive season was, to a certain extent, unabated. However, the sustainability of such demand is transient.
2QFY20 Results Update Key Sectors:
Ind-Ra analysed the Q2FY20 results of its sample of 378 listed companies across key debt heavy sectors. The agency sees a broader slowdown in aggregate revenue across sectors. The median top–line’s year-on-year growth of Ind-Ra’s sample declined to 8.04% in 2QFY20 from 17.36% in 2QFY19, and that of median EBITDA margins declined 236 basis points.
At least in the near term, Ind-Ra expects the Indian corporates to continue to face top-line challenges emanating from the broader slowdown in the demand side fundamentals. The timely release of government dues will be critical for managing the working capital requirement of corporates.
The agency believes an improvement in corporate performances is likely to be delayed and recovery in aggregate demand is going to be a key factor.