The market turned resilient again after a couple of days of consolidation. Robust tractor sales for the second consecutive month has increased the confidence of recovery. The economy is also showing a few prominent signs of fundamental improvement.
In an economic cycle, improved tractor sales data is the first sign of improving activities at the ground level. It is usually followed by improved two-wheeler sales, followed by demand recovery for passenger and commercial vehicles.
June's PMI manufacturing data throws yet another encouraging sign. Manufacturing PMI for June stood at 47.2, compared with 30.8 in May. PMI less than 50 indicates contraction but the level of activity has improved significantly from last month.
The bankers also continue to report improvement at the ground level. Large banks are seeing improving collections as well as the decline in new moratoriums. The share of deposits in the overall liability mix is also improving with depositors choosing to park their savings with large banks due to safety concerns.
The credit growth is still far from satisfactory though as the bankers remain apprehensive about fresh disbursals. Retail credit growth in May moderated further to (-2.9%) YTD, Services growth declined (-2%) YTD, Industry credit de-grew by (-1.5%) YTD and Agri was down (-1%) YTD.
In the retail segment, housing loans were down (-0.7%) YTD, credit cards (-14%), and other personal loans were (-3.6%) down.
Key takeaways:
Tractor sales figures are the major comforting factor and the first sign of emerging green shoots. M&M reported its second-best June sales figures for tractors while Escorts also repeated the stellar performance of May.
India's manufacturing PMI in June contracted for the third consecutive month. However, it is still a significant development. June PMI at 47.2% in June is significantly up from 30.8% in May. It indicates that the activity level in India is fast reaching pre-lockdown levels and the country is poised to see expansion in July.
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