UPDATES:
>> BFSI: The advent of MCLR and a new ball game
> SBI has announced its MCLRs, the new system of internal benchmarks for loan pricing, which comes into effect today. SBI announced 7 MCLRs of varying maturities (overnight to 3 years). The residual maturity of the loan (measured from next reset period to end-point of the loan) ascertains which MCLR is applicable. Media reports suggest SBI is likely to choose one-year reset for key loan segments (home loans & top-rated corporate loans). Two key observations: (1) the range of MCLRs (8.95-9.35%) is not too different from existing base rate of 9.3% and short maturity MCLRs (e.g., 3-month MCLR of 9.1%) is not yet competitive vs CP market (3-month CP rate is 8.7%); and (2) SBI's likely choice of one-year reset (maximum allowed by the RBI) could present two risks – (a) a bank with better matched asset-liability can compete better by offering short reset period; and (b) risk of margin compression in the event of monetary cycle turning to tightening phase. (Ravi Singh, +91 22 3043 3181)
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> Strategy: Ten interesting things that we read this week
> At Ambit we spend a lot of time reading articles that are not directly relevant to Indian stocks. However, since the Indian economy is now umbilically linked to its global counterparts, the articles that we come across have relevance for Indian stocks and the Indian economy. In that context, this report contains the ten most interesting pieces that we read this week. (Prashant Mittal, CFA, +91 22 3043 3218)
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> ANALYST NOTES:
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> Economy: RBI may hold rates; focus on providing liquidity-related relief for now
> While we do believe there is scope for rate cuts to the tune of 25-50bps in FY17, we highlight three reasons why the RBI may hold rates on 5th April: 1) low likelihood of the recent decline in food inflation sustaining as it was not driven by structural efforts at improving food supply; (2) it would make a great deal of sense for the RBI to signal to the Central Government that the fiscal maths for FY17 appears overtly ambitious and that the Government needs to do more to build credibility; and (3) though oil prices have a limited impact on CPI inflation, it is worth noting that Brent prices (in Rs) have rallied by ~17% over the last two months. The big focus of the upcoming monetary policy is likely to be alleviating liquidity pressure (via SLR or CRR cuts or other non-conventional tools) as India's credit to deposit ratio is currently at a 20-month high. (Ritika Mankar Mukherjee, CFA, +91 22 3043 3175)
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> For the list of listed stocks where AMBIT Capital and/or its affiliates hold investment equal to or greater than 5% of their aggregate net worth, please click here
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