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Motilal Oswal 5 Year G-Sec Fund of Fund (G) - 10.0996Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive (G) - 11.3978Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive-Dir (G) - 11.4432Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative (G) - 11.0086Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative-Dir(G) - 11.0577Motilal Oswal Dynamic Fund (Div-A) - 14.0282Motilal Oswal Dynamic Fund (Div-Q) - 12.1715Motilal Oswal Dynamic Fund (G) - 15.4794Motilal Oswal Dynamic Fund-Dir (Div-A) - 14.2839Motilal Oswal Dynamic Fund-Dir (Div-Q) - 12.4147Motilal Oswal Dynamic Fund-Dir (G) - 16.4352Motilal Oswal Equity Hybrid Fund - Direct (G) - 15.9316Motilal Oswal Equity Hybrid Fund - Regular (G) - 15.1295Motilal Oswal Flexi Cap Fund(D) - 25.667Motilal Oswal Flexi Cap Fund(G) - 34.1454Motilal Oswal Flexi Cap Fund-Dir(D) - 25.7934Motilal Oswal Flexi Cap Fund-Dir(G) - 36.6864Motilal Oswal Focused 25 Fund - Direct (D) - 21.5271Motilal Oswal Focused 25 Fund - Direct (G) - 36.7729Motilal Oswal Focused 25 Fund (D) - 19.2501Motilal Oswal Focused 25 Fund (G) - 32.7989Motilal Oswal Large and Midcap Fund - Dir (D) - 17.2903Motilal Oswal Large and Midcap Fund - Dir (G) - 17.3049Motilal Oswal Large and Midcap Fund (D) - 16.6742Motilal Oswal Large and Midcap Fund (G) - 16.6742Motilal Oswal Liquid Fund - Direct (Div-D) RI - 10.0077Motilal Oswal Liquid Fund - Direct (Div-F) RI - 10.0106Motilal Oswal Liquid Fund - Direct (Div-M) - 10.0363Motilal Oswal Liquid Fund - Direct (Div-Q) - 10.0636Motilal Oswal Liquid Fund - Direct (Div-W) RI - 10.0058Motilal Oswal Liquid Fund - Direct (G) - 11.2679Motilal Oswal Liquid Fund - Regular (Div-D) RI - 10.0055Motilal Oswal Liquid Fund - Regular (Div-F) RI - 10.0102Motilal Oswal Liquid Fund - Regular (Div-M) - 10.036Motilal Oswal Liquid Fund - Regular (Div-Q) - 10.0612Motilal Oswal Liquid Fund - Regular (Div-W) RI - 10.013Motilal Oswal Liquid Fund - Regular (G) - 11.218Motilal Oswal Long Term Equity Fund (D) - 20.9201Motilal Oswal Long Term Equity Fund (G) - 26.6307Motilal Oswal Long Term Equity Fund -Dir (D) - 25.0335Motilal Oswal Long Term Equity Fund -Dir (G) - 29.2078Motilal Oswal Midcap 30 Fund (D) - 27.2014Motilal Oswal Midcap 30 Fund (G) - 44.5271Motilal Oswal Midcap 30 Fund-Dir (D) - 28.2418Motilal Oswal Midcap 30 Fund-Dir (G) - 49.0347Motilal Oswal Multi Asset Fund - Direct (G) - 11.0007Motilal Oswal Multi Asset Fund (G) - 10.783Motilal Oswal Nasdaq 100 FOF - Direct (G) - 25.2618Motilal Oswal Nasdaq 100 FOF - Regular (G) - 24.9588Motilal Oswal Nifty 50 Index Fund - Direct (G) - 14.307Motilal Oswal Nifty 50 Index Fund (G) - 14.1909Motilal Oswal Nifty 500 Fund - Direct (G) - 16.7917Motilal Oswal Nifty 500 Fund (G) - 16.5484Motilal Oswal Nifty Bank Index Fund - Direct (G) - 13.1205Motilal Oswal Nifty Bank Index Fund (G) - 12.9312Motilal Oswal Nifty Midcap 150 Index Fund (G) - 19.9926Motilal Oswal Nifty Midcap 150 Index Fund-Dir (G) - 20.3048Motilal Oswal Nifty Next 50 Index Fund - Dir (G) - 14.8468Motilal Oswal Nifty Next 50 Index Fund (G) - 14.6557Motilal Oswal Nifty Smallcap 250 Index Fund (G) - 20.8301Motilal Oswal Nifty Smallcap 250 Index Fund-Dir(G) - 21.1458Motilal Oswal S&P 500 Index Fund - Direct (G) - 15.5789Motilal Oswal S&P 500 Index Fund (G) - 15.4147Motilal Oswal Ultra Short Term Fund - Dir (Div-D) - 10.0586Motilal Oswal Ultra Short Term Fund - Dir (Div-F) - 10.083Motilal Oswal Ultra Short Term Fund - Dir (Div-M) - 10.0657Motilal Oswal Ultra Short Term Fund - Dir (Div-Q) - 10.2106Motilal Oswal Ultra Short Term Fund - Dir (Div-W) - 10.0698Motilal Oswal Ultra Short Term Fund - Dir (G) - 14.252Motilal Oswal Ultra Short Term Fund (Div-D) - 9.9888Motilal Oswal Ultra Short Term Fund (Div-F) - 9.9998Motilal Oswal Ultra Short Term Fund (Div-M) - 9.9894Motilal Oswal Ultra Short Term Fund (Div-Q) - 10.1345Motilal Oswal Ultra Short Term Fund (Div-W) - 9.9924Motilal Oswal Ultra Short Term Fund (G) - 13.7576

Credit growth dependent on demand rather than supply; corporate may boost growth further

Blog Blog Details
  • October 20, 2021
  • Santosh Singh|
  • Head of Research
Lower demand for credit from corporates has been the main reason for lower credit growth

Credit growth in India over FY14- 21 has slowed down to sub 10%, which was around 18% between FY07-14. This period saw declining GDP growth which is one of the most important levers for credit growth. Other than lower GDP growth rate anaemic credit growth was driven by following factors;

Demand side problem:

Lower demand for credit from corporates has been the main reason of lower credit growth, whilst the overall credit growth was around 9%, corporate credit during FY14-21 grew at 2% compared to FY07-14 period growth of around 20%. This was driven by massive NPL formation during FY14-21 period in loans to infrastructure and commodity linked companies. Also, this period has been marked by commodity price deflation and stagnating real estate market, both being negative for credit growth and credit quality. However, we saw retails loans showing more than 15% growth rate driven by home loans and personal loans.
 
Supply side problem:

As discussed earlier, the supernormal growth of FY10-14 was followed by massive NPL formation. This was driven by bad underwriting, slowdown in economy, policy inaction and a bearish commodity cycle. As a result of this anyone who participated aggressively was impacted severely. Impact was much higher for the PSU banks other than SBI which accounted for almost 40% of the capacity. Most of these banks went into PCA framework. Likes of SBI, ICICI and Axis although not in PCA but were facing severe stress due to these NPLs. ICICI and Axis also saw management changes led by these loans. This meant that baring a few banks most of the capacity was stressed and not very active in the market

Alternative sources of funding:

This period also saw vast quantum of investments coming from digital companies, which are generally cash flow negative in the earlier phase due to opex. These companies don’t lend themselves favourably for debt market and hence equity became a big source of funding.
 
For last couple of years we have seen heightened liquidity in the markets which has meant that market borrowings and equity has been available at a cheaper rate, hence, corporates have been replacing higher cost debt with equity and market borrowings.
 
However I think the tide is turning and we may see a revival in the credit growth given;

    a)  Supply side problems are mostly resolved given most of the other PSUs are out of the PCA framework. Although I would not expect PSU banks other than SBI to get a lot active, but with corporate NPL problems behind for large corporate banks like SBI, ICICI and Axis, A lot of capacity is back in business. These banks are also sitting on good liquidity as well as very strong Balance Sheets. 

    b)  Hence now growth is totally dependent on demand rather than supply. Given higher liquidity and the corporates still in deleveraging phase, I would not expect high demand for credit from the corporate segment in next 6 to 12 months. However over a 24 month period a) government focus on infrastructure creation would meant that the first phase of credit demand may come from the government and government owned organisations. B) We have seen working capital requirements falling given very little demand in the market, as we expect the demand for goods and services to come back for the manufacturing sector we may see demand for working capital loans growing at a faster rate c) we have already seen certain sectors in the commodity space returning to profit and this sector may start seeing capacity addition d) real estate has gone through one of the longest bad cycle in last few decades, we are seeing some demand revival in the sector.

    c)  Retail growth may remain strong given India is still a credit starved country and hence once we see corporate demand for credit returning this segment may show further promise

This article was originally published on financialexpress.com on 15th October, 2021

Disclaimer: This article has been issued on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact. The Stocks mentioned herein is for explaining the concept and shall not be construed as an investment advice to any party. The information / data herein alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. All opinions, figures, estimates and data included in this article are as on date. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Readers shall be fully responsible/liable for any decision taken on the basis of this article. Investments are subject to market risks, read all related documents carefully.
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