India Economy And Strategy - Bank Deposit Quagmire And Its Consequences: Systematix

Systematix Research Report

Our inquest in this note addresses-

1. the underperformance of banks, which continue to be the dominant part of India’s markets;

2. the recent drop in RBI’s reserve money growth to a multi-decade low of 3.8% and the associated slackness in bank deposits. We explore the implications of these trends for the banking sector’s performance; and

3. whether there is value in banking stocks after years of underperformance.

While the current de-rating may seem appealing and cause sporadic spurts, we believe the banking sector is still at the advent of a normalization process amidst the underlying macroeconomic imbalances. Therefore, we maintain an underweight position in the sector and will be selective in our stock picks.

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