Pune: Several investors from the city and across the country are moving towards investing in Mutual Funds instead of making bank deposits.
Entities in Pune - including government bodies like Pune Municipal Corporation - are increasingly looking at domestic capital market issuance, which looks more profitable.
Speaking to Sakal Times, Managing Director of India Ratings and Research Rahul Sawhney said, "NPAs have impacted banks balance sheets and that to an extent has constrained their power to grow. Due to demonetisation and other factors, there is surplus liquidity, interest rates on bank deposits are coming down and there is a trend in liquidity moving to stronger private sector banks and Mutual Funds. Mutual Funds are also investing only in rated bonds. NBFCs are also growing by catering to lending like affordable housing, SME loans, etc. Thus, the whole shift from loans to bonds is visible.”
Pointing towards Pune Municipal Corporation's recent announcement to issue bonds, he said that with entities in Pune, including Government bodies moving in this direction, it made sense for India Ratings and Research to open a branch in the city. "Pune has good variety of business from ancillaries to primary manufacturers, private sector manufacturing companies to real estate developers and multinationals. With our new branch in Pune, we will be able to support our client base of issuers more effectively," he said.
He added that with very limited new capital investment happening; large part of financing is refinancing and financing in infrastructure.
Sharing his insights into the poor performance of the economy in the first quarter (Q1) of this financial year, Sawhney said, "While there has been some impact due to implementation of GST and a slowdown as manufacturers re-price and adjust to the new tax regime, we will see the changes settling down and growth picking up as we go into Q2, Q3 and Q4. The same scenario was visible when Value Added Tax (VAT) was introduced."
Elaborating further, Managing Director and Head - Business and Relationship Management, India Ratings and Research, Tarun Bansal, said, "The temporary slowdown reflects the nature of change and manufacturers are having to re-distribute the re-priced product. But GST is expected to improve state finances, tax collection and tax buoyancy. It will also bring about greater formalisation of the tax base and increase tax to GDP ratio.
Also, demonetisation should not be considered as an event in isolation but a part of the reform process. It must be looked at with development of rural banking, Aadhaar linking and GST, which are all aimed at formalising the Indian economy."