The government's reform drive is working well to boost sentiment among foreign investors -- that's the word from top investment bankers. However, speaking to CNBC-TV18’s Archana Shukla, the market veterans also added that a real pick-up in the investment cycle is still a few quarters away.
Prime Minister Narendra Modi believes in cleaning up -- be it external surroundings, or internal mindsets when it comes to investing in the country.
While the pace at which the government is moving on the reform roadmap may be up for debate, bankers are unanimous that there is a move -- and a rather positive one -- when it comes to investor sentiment.
Says Rahul Banerjee, MD and regional head - capital markets, Standard Chartered, “This has been a record year for bond markets, FIIs are coming in and investing in domestic bond markets and domestic guys are raising USD 20 billion in dollar bonds. Things are looking up,”
“Money has come in anticipation, but we haven't seen actual investments on ground and that needs to take off,” says Deutsche Bank MD Randhir Singh, adding that the investment cycle will take 12-18 months to pick up.
And is the investment cycle pick up, particularly in infrastructure space, also a year away?
“Infrastructure pick-up takes even longer than manufacturing,” says SJ Balesh, senior director - resources, IDFC. “So it is at least 24 months to go.”
Bankers feel the actual economic pick up is taking somewhat longer because corporates want to be absolutely sure of policies, before committing new capital.
They, however, add that once this momentum gets going, the lending cycle will turn as demand for loans goes up.
Says Ashwini Kapila, MD, Barclays, “I don’t think lending is starting in a big way yet. What is happening is old recoveries or bad loans or stress debts will start plateauing soon, in a few more quarters. Bank results are already showing that. Once that's done, you will see the lending cycle pick up. As of now I don’t see any major loan growth happening in a big way yet.”
It is the same cautious view these veteran bankers have on interest rates. Most are of the opinion that the bond market may be getting slightly ahead of the curve in expecting a rate cut next month.
According to bankers, RBI will maintain status quo on December 2, with the first cut in the benchmark rate still a few quarters away.
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