Market needs fresh confirmation on the revival trend. While improvement was visible on many parameters in June, the momentum needs to continue in coming months. The developments around the loan moratorium is going to be one important parameter to track. It is going to be the centre piece across the discussion tables this earning season.
With the market tumbling under last hour selling, the future momentum is going to depend on how recovery shapes up in the coming months. After the encouraging signs during June, the recovery trend needs to sustain for the market to make a fresh up move.
Car and two-wheeler retail sales picked up in June; so did power consumption. However, discretionary consumption still remains down with muted urban markets. It is also important to realise that despite the significant pick up in activity levels, Indian economy was still shrinking in June; only the rate of fall was arrested. The improvement has to continue in the following months, if the market has to maintain its current momentum.
Fresh funding:
The MSME sector received a much needed relief with banks finally extending fresh credit to the sector. Finance ministry has said that banks have sanctioned loans of about Rs 1.15 lakh crore out of the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS). The scheme is a part of Rs 20- lakh crore 'Aatmanirbhar Bharat Abhiyan' package. However, disbursements against this stood at Rs 56,091.18 lakh crore till July 4.
The talking point:
The banking sector, on an overall basis, is expecting to see a modest growth in Q1. Provisioning strategy and trends on moratorium are going to be the key parameters to track.
The slippages are likely to remain negligible with stressed accounts shielded by the moratorium. However, bankers are going to make heavy provisioning, foreseeing the spike in
slippages once moratorium period ends.
On a positive side, the overall trend in moratoriums has declined during the second round. As activity levels improved and banks strongly discouraging the blanket moratorium. However, its impact on banks at an individual level will have a far fetching impact. It is going to be one of the most important topics this earning season.
