India Morning Report: A Bond catch up makes yields 8.3% on the 10 year bond

Interest rates keep falling allowing banks to reduce interest rates on deposits with the liquidity situation easing. Any rate cuts in the RBI repo rate can be in contention only after the banking system starts cutting lending rates and the MSF corridor reverts on the lower side between the 7.5% repo rate and the MSF rate of 8%.

However, stock markets buoyed by the value correction witnessed on Monday ( and a partial resolution of the quandary proposed by us in the Monday report) SBM is announcing results this afternoon as we update late today stating a change in focus ( like it was yesterday’s Biryani) to retail even as stressed assets come back from 12% of book to just above 10%. Early days yet to talk of any recovery for the last SBI leg likely to be merged into the behemoth in the next two years. The Bank has only recently changed focus from bulk deposits, treasury deposits being a key risk for PSUs till 2012

LIC Housing Finance is a buy at corrections with YRES Bank still forming the core of high performing portfolios even as the broader sector becomes a pick and HDFC HDFC Bank and ICICI Bank join core picks, SBI having moved up to new levels recently a little out of breath from all the huffing and puffing, still trying to catch up in brand recognition with the new private sector winners. REtail assets may not last beyond this fiscal as winning memes for banks and NBFCs , India not exactly a mirror of other consumer finance led economies.

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