Emkaynomics - Fortnightly round up of key banking and economic indicators

- Non-food credit growth (ended 4th Nov' 2011) has eased further to 18% yoy levels. With a view to meet RBI target of 18% yoy in FY12, credit growth for balance period should be 2x of actual growth YTD

- In our view, as higher base-effect of previous year and elevated interest rates hurt growth, the full-year target seems a bit on the upper-end

- Growth in deposits continues to remain healthy at 17.5% yoy levels (well within RBI targeted region of 17%yoy for FY12). Demand deposits stood at 10% of total deposits (-4% yoy)

- CD has remained stable; inc. CDR has been on an up-tick and stood at 54%. Money supply growth came in at 16.1% yoy. On other hand, M1 growth at mere 5.3% has been on a steep decline

- Liquidity remained tight with net outflow at Rs1,060bn (1.9% of NDTL). Given, higher government borrowing and credit up-tick, we expect liquidity to remain in negative terrain for H2FY12

- Borrowing programme, high inflation and volatile IIP have pushed yields upwards. 10-yr Gsec / 1-yr G-sec had inched to multi-quarter high of 8.96%/8.66% respectively. Recent OMO provided a breather

- Call money rates have moved in tandem with repo rate. With H1FY12 fiscal deficit at high 70% of FY12BE, we expect GoI to raise the borrowing programme by further Rs300-400bn.

Source : Equity Bulls

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