BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Motilal Oswal Report
In a surprise announcement, the Reserve Bank of India increased the repo rate by 40 basis points, thus, initiating the monetary tightening cycle.
The increase in repo rate will be positive for banks as they will benefit from higher yields on the lending portfolio that are linked to external benchmarks.
We note that a pick-up in advances growth, improving asset mix (healthy growth in unsecured, micro finance institution and small and medium enterprise segments) and continued hikes in policy rates will drive higher yields for banks over FY23E.
However, a rise in deposit rates and any material change in demand environment have to be monitored even though we maintain a positive outlook on the banking system margins.
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