Indian economy – Towards a resilient bounce back?

Banks CASA deposits increased by 10 lakh crores (March 21) in a year when the economy contracted – shows the amount of pent-up demand that is yet to be unleashed on the retail side as the country re-opens.

The corporate cycle is where new growth will be unleashed;

1) What Covid has effectively done is ensure the survival of the fittest. Massive deleveraging was seen in the last 12 months. Record numbers of SME plants were permanently closed .

2) This happens to co incide with 2 things;

• Industry credit and capex cycle hitting a decade low.
• The NPA cycle is almost behind us.

Banking as a sector is sitting at an all time high Provision coverage Ratio of 70% +.

History suggests that in periods post such high provisions, the credit cycle kick starts again and a new CAPEX cycle begins leading to an economic boom. From a market perspective – I believe that the “bubble crowd” will continue to be disappointed. Comparing individual stocks to the economy is only a half story. For every kirana store that has shut down, the business has been transferred to an online aggregator.

Massive shift from unorganized to an organized underway. The valuations you see on your screen are the ” survival of the fittest”.

Priyam Shah

Investor, Trader and aspiring fund manager. Its a new life everyday at 9:15 and thats what excites me.

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