Speaking to Moneycontrol on the sidelines of PMS Bazaar PMS-AIF summit in Mumbai on October 18, Shailendra Kumar, Chief Investment Officer Narnolia Financial Advisors said that we are three-quarters away from a revival in most economic parameters.
"Although most of the economic parameters are not looking healthy, things will not stay as it is for infinity as everything moves in cycles," Kumar said.
He explained the ‘Cycle’ – in simple words stating that it means an upswing and a downswing. He explained that we are currently in a downswing and it will be an upswing next. The only question is where the bottom would form.
But investors should not extrapolate the current environment until infinity. Even the down cycle will end in time.
If we look at various cycles – inflation peaked out two-years back, the interest rate cycle was 8 percent bond yield last August and now it is close to 6-6.5 percent.
Commenting on Non-Performing Assets, Kumar added that in FY18, NPAs were at 11.5 percent, then declined to 9.8 percent, and in FY20 would be close to 10 percent – but it will not make a new high.
So why is there so much noise? In the initial phase of the NPA cycle, the number of accounts was small, but the extent of the value of those numbers was large. Today, the number of borrowers against NPAs is high, but the amount has come down. Overall NPAs are also systematically reducing.
When NPAs started in 2014 – the lending book of Indian banks was Rs 65 lakh crore, and out of that Rs 18 lakh crore turned NPAs. Today, we are sitting at advances of around Rs 100 lakh crore and slippages are Rs 1.5-2 lakh crore which is not meaningfully high.
The problem is in the consumption and credit cycle which has not revived. It will take another quarter or at max three-quarters to reverse in every economic parameter, Kumar added.
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