A popular theory in the market is that the main reason for banks’ inability to garner low-cost deposits fast enough to match loan growth is that more savers are diverting their money to the stock market. This has led to mutual fund managers blaming the banking lobby for some of the rule changes in recent times. But the theory of the stock market hurting banking deposit growth may be flawed, argue Nomura analysts Param Subramanian, Ankit Bihani, Ajit Kumar, and Parth Desai.

From their note:

“There is a misplaced narrative among many investors that money moving into capital markets (stocks and mutual funds) is affecting system deposit growth. This is incorrect, as flows into capital markets stay with the banking system (money flows from the buyer’s deposit account to the seller). Money in capital markets finds no mention in RBI’s broad money statistics – as this is already accounted for in system deposit data.”

Still cautious

The market is rallying, but foreign investors don’t seem to be giving in to the fear of missing out (FOMO) for now.

From Emkay strategist Seshadri Sen’s note:

“Long-only investors have largely missed the post-election rally, both on absolute allocations to India and sector positioning in high-beta SMIDs. They are reluctant, however, to jump in at this stage due to expensive valuations.”

The contra indicator here possibly could be that too many fund managers are getting optimistic about the economy and earnings outlook. Also, political concerns have all but vanished.

Star Health (Rs 520, 0.2%)

Down 5 percent over the past month on concerns over business model sustainability of standalone health insurers (SAHIs) if the government amends the Insurance Act to permit composite licenses.

Bull Case: SAHIs have unique strengths, including a diverse product range, strong hospital partnerships, and robust claims and underwriting capabilities, which are not easily replicated.

Bear Case: Life insurers could threaten SAHIs' market position. With an established agency network, life insurance companies might gain the upper hand.

Ujjivan Small Finance Bank (Rs 45.95, -5%)

FY25 loan growth guidance and RoE target reduced to 20 percent

Bull case: Plans to increase the contribution of secured assets to 35 percent by FY25 and 40 percent by FY26. Looking to strengthen retail deposit franchise and leverage technology.

Bear case: Slower microfinance lending in FY24 due to pockets of stress in Punjab, Gujarat, and Kerala. The planned increase in the secured portfolio could reduce gross NIM.

Mahanagar Gas (Rs 1,487, flat)

Bajaj Auto is to launch the world’s first CNG motorcycle on July 5, with an initial production capacity of 20,000 units per month.

Bull case: Bajaj’s initial 20,000 per month capacity is located in Maharashtra; Nuvama expects MGL to be an early beneficiary, estimating a 2%-plus CNG volume gain by FY26E.

Bear case: Changes in domestic gas allocation could force greater reliance on expensive imports, hurting margins. Rupee depreciation and higher prices for allocated gas are other risks.

Prestige Estates (Rs 2,035, 2.6%)

Hospitality arm IPO soon

Bull case: Guidance of pre-sales growth of 25 percent YoY by FY25, supported by its dominant position in Bengaluru, upbeat residential demand, and cheaper valuations compared to peers.

Bear case: Muted residential demand, delay in execution of projects, and high interest rates potential risks. Recent gains are partly driven by hopes of the hospitality arm going public. Any delay there could hit sentiment.