Long weekend blues hit markets

Nifty50: 17,891 ▼ 226 (-1.2%)
Sensex: 60,205 ▼ 773 (-1.2%)

Hello dear reader!

Today clearly belongs to Pathaan AKA Shah Rukh Khan! (Cue: his signature arms open pose.)

Steering its way through an umpteen number of controversies, King Khan's first movie in 4 years, has become the ‘Badshah’ of all Bollywood releases. 

Reports suggest that to tackle the huge demand, 300 shows of the highly awaited movie have been added across India.

Fans and trade pundits believe Pathaan will prove to be a major box office draw and end the drought of a mega bollywood hit. 

The movie's release is well-timed as well. Between a public holiday tomorrow and a weekend, there is a Friday... on which half of India is presumably on a SICK LEAVE! (No, We aren't judging.) 

Anyway, it looks like 'Besharam Rang' is on its way to being the colour of the season... but for markets, it was red all the way today.

• The markets witnessed intense sell-off today. 
• Persistent FII selling is weighing down the markets.
• Of the Nifty50 universe, 35 stocks declined.

All Nifty sectoral indices closed in the red with PSU Bank (-3.5%) and Bank (-2.5%) being the top losers.

What’s trending

⭐ Tata Motors is burning rubber!

In the December quarter, the automaker (-0.8%) reported net profit of ₹2,957 crore compared to a loss of ₹1,516 crore in the same quarter last year. In the same period, its revenue also rose 22% to ₹88,489 crore. The management said that improving semiconductor supplies and stable commodity prices will aid revenue growth.

⭐ Indus Tower shares tank 

Shares of India’s largest mobile tower installation company (-7.1%) declined after it reported a loss of ₹708 crore in Q3FY23. The company had to set aside money (provisioning) due to a continued shortfall in collections from one of its  major customers.

⭐ Zomato’s sharp fall 

Shares of the online delivery platform (-7.9%) sharply fell after reports claimed that it is scrapping its 10-minute delivery service. However, the company reportedly clarified later that it is not shutting down instant delivery and is in fact, rebranding this business segment. 

⭐ CarTrade zooms ahead 

In Q3FY23, the multi-channel auto platform (+1.4%) reported net profit of ₹14 crore compared to a loss of ₹18 crore in the same quarter last year. This was supported by its best-ever revenue of ₹115 crore, up 23% YoY.

⭐ Adani FPO receives strong traction 

The anchor book of Adani Enterprises’ follow-on public offer (FPO) was oversubscribed 1.5 times, according to reports. The FPO will open for subscription on Friday. Click here to pre-apply to the FPO on Upstox. 

In Focus

The battle for your bank deposits

Indian banks have been registering strong Q3 performances, riding on robust loan growth. But, bank deposits are a different story altogether. One would think a hike in rates by the RBI should translate to higher interest rates on your loans, and deposits. While interest on loan has increased, interest that you earn on deposits has not increased correspondingly. On the other hand, banks are struggling to bridge the gap between loans and deposits. 

What does that mean? For those who have bank FDs, you could expect interest to go up, if and when banks hike rates. What do we mean by that? Read on.

The business of banking

You know banks make money from the interest you pay on loans. But, where do you think banks get money to lend? One of the key sources are your deposits. 

Credit-deposit gap 

Think of deposits as raw material for banks. It’s simple. Banks take your deposits and pay interest on them. Meanwhile, they lend this money out as loans at a higher interest rate. In the process, they make more money.  

However, deposit growth has struggled to keep pace with rising demand for loans. The credit to deposit ratio reportedly stood at 111% in December 2022. Simply put, banks have given out more loans as compared to deposits they hold. And the end of 2022 numbers are not encouraging. While loan growth was at 11%, deposits grew 9.2%. 

Why is deposit growth not keeping pace?

Low rates! Since January 2022, private and public sector banks’ average term deposits rate have increased by 0.51% and 0.55%, respectively. Average lending rates increased 1.04%. Notably, the average term deposit rates are still below the repo rate (6.25%) as well as the inflation rate (~6%). 

Lower returns on deposits means fewer people see it as an investment option. In fact, HDFC Bank’s current and savings account to total deposit ratio (CASA) has dropped to 44% in Q3FY23 from 47% in Q3FY22. ICYDK, these are low cost or the cheapest source of funds for the banks. 

So, in a strong credit growth scenario, there should be a possible battle to garner your bank deposits. Right? But that’s not happened yet. 

Why are you still earning low interest on your deposits? 

A bank makes more money (read, higher net interest margin) if it can borrow cheap and lend at a higher rate. Banks believe that hiking interest on term deposits right now won’t be beneficial for them. If the rate cycle turns, they don’t want to be stuck paying high interest to you on your FD.

Alternative source

In a bid to protect their margins, banks are turning to debt markets. According to reports, banks’ market borrowing has already doubled to ₹4.4 lakh crore in 2022.

So, one thing is clear: the importance of your deposits is increasing with each passing day. But it remains to be seen whether banks will bank on its customers or the debt markets to support the booming credit growth.

T+1 Settlement cycle is here!

From 27 January 2023, the Indian Exchanges will completely move to a T+1 settlement cycle. This transition has been happening since February 2022 in a phase-wise manner. The last batch of stocks will transition into T+1 cycle this week. For the full list of these stocks, click here. 

How will T+1 benefit you? 

• Reduce the risk of non-payment or non-delivery of shares by the broker by one day 
• Provide more liquidity as funds will get credited to the account the next day
• Help to sell the shares purchased on the next day itself. This may help in protecting profits 

Learn with Upstox

What is the T+1 settlement cycle?

The market regulator SEBI has introduced the T+1 (T stands for Trade day) settlement cycle. This means that trades on the Indian Stock Exchanges will be settled within one day of the transaction’s completion. For example, if you buy shares on Tuesday, they’ll be credited to your Demat account on Wednesday. Similarly if you sell shares on Tuesday, expect payment to be deposited in your account on Wednesday. T+1 settlement cycle will cover all stocks in the market and will kick off on 27 January, 2023.

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