Tagged: Equity

ATM :: These are best equity mutual funds to invest in 2018

TIMESOFINDIA.COM | Updated: Jan 10, 2018, 14:44 IST

ATM

NEW DELHI: Markets in 2018 are continuing its bull run with both BSE Sensex and NSE Nifty crossing the psychological levels. The 50-share barometer Nifty on Monday breached the 10,600-mark and the 30-share Sensex rose above the 34,350-mark. With the markets outperforming, investments in equity funds are also giving pretty good returns, a data from Value Research showed.

Let us take a look on which funds can be your best bet amid this bull run:

As per the data, these are top bets in equity funds:

Equity: Large cap
* Mirae Asset India Opportunities Fund: With 36.6 per cent return for a year followed by 15.17 per cent and 20.17 per cent in three and five years respectively. (Note: Three-year and five-year returns are annualised.)
* JM Core 11 Fund: 38.91 per cent in the first year along with 14.76 per cent and 17.31 for the third and fifth year.
* Kotak Select Focus Fund: Returns of 31.99 per cent for one year. 14.21 per cent and 19.84 for three and five years respectively.

Equity: Mid Cap
* Mirae Asset Emerging Bluechip: 46.22 per cent for the first year. 23.22 per cent and 30.19 for three-year and five-year respectively.
* L&T Midcap fund: 1-year investment fetched 50.13 per cent returns, while three-year and five-year drew 22.24 per cent and 28.53 per cent returns.
* Aditya Birla Sun Life Pure Value: 52.46 per cent in first year. 20.59 per cent and 29.65 for three-year and five-year respectively.

Equity: Multi Cap
* Motilal Oswal Most Focused: 40.2 per cent returns for a year and 20.06 per cent for three-year.
* Reliance ETF Junior BeES: One-year investment garnered 43.92, while three-year and five-year fetched 18.41 per cent and 20.05 per cent respectively.
* ICICI Prudential Nifty Next 50: 43.3 per cent returns in the first year. 18.06 per cent and 19.77 per cent in the third and the fifth year.

Equity: Tax Planning
* Tata India Tax Savings Fund: 42.95 per cent in the first year followed by 17.9 per cent in third year and 21.17 per cent in fifth year. Also, the fund has given 18 per cent returns in the past three years and its three-year is the highest in the category.
* IDFC Tax Advantage Fund: 51.71 per cent in one-year, while 17.56 per cent and 21.48 per cent for three-year and five-year respectively.
* L&T Tax Advantage Fund: Returns of 42.43 per cent in one-year. 16.36 per cent and 19.47 per cent in the third and fifth year.

Hybrid: Equity-Oriented
* Tata Retirement Savings Fund: 36.56 per cent, 16.09 per cent and 20.05 per cent returns in first, third and fifth year.
* Principal Balanced Fund: Returns of 35.65 per cent, 15.56 per cent and 17.26 per cent for one, three and five-year.
* L&T India Prudence Fund: 26.52 per cent in the first year, while 13.27 per cent and 18.01 per cent returns in three and five-year respectively.

Debt: Income
* Franklin India Income Builder: 7.52 per cent, 8.39 per cent and 9.03 per cent for one, three and five years.
* SBI Regular Savings Fund: Returns of 7.35 per cent, 9.28 per cent and 9.56 per cent in first, third and fifth year.
* Invesco India Medium Term: 7.1 per cent, 8.17 per cent and 8.12 per cent for one-year, three-year and five-year respectively.

Source: https://goo.gl/LyPuJJ

Advertisements

ATM :: MFs invest Rs 1 lakh cr in stocks in 2017; remain bullish

The high investment by mutual funds could be attributed to strong participation from retail investors.
PTI | Dec 31, 2017 11:15 AM IST | Source: PTI | MoneyControl.com

ATM

Domestic mutual funds pumped in a staggering over Rs 1 lakh crore in the stock market during 2017 and remain bullish in the New Year to maximise the returns for investors.

Mutual funds invested Rs 1.2 lakh crore in equities in 2017, much higher than over Rs 48,000 crore infused last year and more than Rs 70,000 crore pumped in during 2015, latest data with the Securities and Exchange Board of India (Sebi) showed.

“We are seeing a clear shift in preference for financial assets over physical assets such as real estate and gold, which is likely to continue even going forward.

“Apart from this trend, the consistent delivery of returns by the mutual fund industry, prudent risk management and increasing initiatives on enhancing investor awareness assisted in increasing the penetration of mutual fund products,” Kotak Mutual Fund CIO Equity Harsha Upadhyaya said.

The high investment by mutual funds could be attributed to strong participation from retail investors.

In fact, retail participation is now providing the much needed liquidity to the stock markets that have been largely driven by Foreign Portfolio Investors (FPIs) for the past few years.

The investment by mutual funds in equities have outshone those by FPIs.

FPIs have infused close to Rs 50,000 crore this year after putting in over Rs 20,500 crore last year and nearly Rs 18,000 crore in 2015. Prior to that, they had pumped in over Rs 97,000 crore in 2014.

“This year the domestic institutional investors have pipped FPIs on net inflows, thus making the market less dependent on FPI money.

“This has also provided greater stability to the market as during the times when FPIs were pulling money out of the Indian equity markets, the stock market continued its upward march with the support from the flows by domestic institutional investors,” Morningstar India Senior Analyst Manager Research Himanshu Srivastava said.

Retail money flew into equities through mutual funds supported the benchmark indices — Sensex and Nifty — that surged by 28 percent and 29 percent respectively this year. Further, retail investor accounts grew by 1.4 crore to 5.3 crore.

The spike in bank deposits and consequent decline in interest rates following demonetisation on November 8, 2016 has also helped mutual funds.

“Mutual fund distributors too have played a key role in connecting with their existing and new customers. This has not only resulted in his increasing wallet share of customer, it has also helped the distributor in getting new customers to the industry,” Amfi Chairman A Balasubramanian said.

“It is also believed that investors are no more interested in buying into traditional asset classes such as real estate and gold, thus moving to financial asset class,” he added.

Source: https://goo.gl/ibBNN3

Interviews :: Alpha generation in large-cap funds would compress going ahead

Mahesh Patil, Co-CIO, Aditya Birla Sun Life AMC on how he is creating alpha in the large cap space, his contra calls and more.
By Morningstar Analysts | 27-12-17 |

The asset size of Aditya Birla Sun Life Frontline Equity Fund has crossed Rs 20,000 crore. Do you see size posing an issue to manage this fund going forward?

We maintain a good diversification in this fund by having exposure across sectors. We aim to beat the benchmark consistently and incrementally rather than taking very large sectoral bets. Given that the fund invests at least 80% of its assets in large cap stocks, we don’t see size posing as a challenge. Besides, the core of the portfolio has very long term holdings. That said, as the fund size increases it becomes slightly more difficult to build or unwind positions in stocks and needs more effort. But it is part of the process and does not affect the performance significantly.

We have a large number of stocks (60-70) in the portfolio as compared to other similar funds in the industry. Before deciding the quantum of exposure warranted in any stock, we take a close look at the liquidity of the stocks. This strategy allows us to manage large size.

It is becoming difficult for managers to generate alpha in the large cap space. How do you overcome this challenge?

We are seeing a huge rally in the mid and small cap stocks and large cap funds obviously can’t take exposure to such stocks. So multi-cap funds have been able to generate decent alpha by maneuvering where the opportunities are.

As markets mature and price discovery happens across stocks its going to become difficult to generate alpha in large caps. The alpha generation which we saw in the last three to four years would compress going ahead. This is because the alpha was high as compared to the historical average, especially during calendar year 2014-16.

We never target to generate superlative alpha in large cap funds. Instead, we endeavor to find some new stock ideas every year which keeps the portfolio fresh. If there is a serious underperformance, we are nimble enough to take corrective action. While everything is fairly priced in the market at this juncture, we try to continuously look out for undervalued companies. Some amount of contrarian investing and moving away from the crowd helps to spot early turning points in stocks/sectors. Similarly, we maintain a discipline to trim exposure in certain stocks that have overshot their valuation target. This strategy enables us to buy stocks which are relatively cheap in terms of valuation. So some amount of active management is also required at this juncture to generate alpha in the large cap space.

In which sectors/themes are you deploying the steady inflows coming in equity and balanced funds?

We have been overweight on banking and financial services. Financial services sector has had a good run and the valuations have moved up. Hence we are more discrete now in choosing the right segments that offer better growth. While we prefer private retail banks, we are slowly warming up to corporate banks because of some clarity emerging on resolutions of bad debts and a cyclical recovery in economy.

Besides, we are positive on consumer discretionary space. We are seeing a higher demand for discretionary consumption as the per capita income is moving up in India. Further, the implementation of GST will benefit players in the building material, consumer durables and retail space. Rural consumption is also starting to improve with normal monsoons and government focus on stepping up rural spending.

We are fairly overweight on metals. Metal prices are steady as China is cutting down capacity on the back of environmental issues which is supporting price. Indian companies are also deleveraging which will increase their equity value.

Another sector where we are taking a contrarian call is telecom. We are seeing consolidation happening faster than we expected in this sector. While there is still some pain for a few quarters, over a three-year time frame it could be a good time to look at some leading telecom companies.

We are selective in the infrastructure space. Road, railways and urban transport are some pockets where there is significant traction. Companies positioned in this sector are expected to see good increase in their order books.

Post SEBI’s diktat on scheme categorization, how are you restructuring your funds? Are you planning to merge smaller schemes?

Fortunately, we have been working on consolidating schemes much before the SEBI circular came out. Most of our equity funds are aligned as per SEBI categorization. We would look to merge some thematic funds.

Overseas fund of funds category is seeing continuous outflows. What are the reasons for the waning demand for this category.

The awareness level about this category is low. Domestic market has been doing well so people are preferring to invest in India. Overseas fund of funds have done well though.

As markets mature and you see enough ownership of domestic funds, people would look to invest outside India. There are a lot of new generation companies which investors can take exposure through these funds.

Though taxation of this category is an issue, you need to realize that if you are making good returns it should not be a problem. HNIs who already have a high exposure to India can look at these funds. Also, those wish to send their children overseas for education can consider these funds because the underlying returns are dollar based. To some extent, you are taking the currency hedge through these funds.

When do you see private-sector investment picking up?

Private sector investment has been elusive. But there are a couple of factors which indicate that investment will pick up one year down the line. Firstly, capacity utilization has bottomed out and is showing early signs of improving. Secondly, while a lot of large corporates in metals and infra space are saddled with high debt were are seeing the deleveraging cycle has started for some companies. Corporate debt to GDP which peaked out in 2016 is starting to come off. Finally, bank recapitalization would enable corporates to re-leverage and begin the next capex cycle. Sectors like Steel, Oil and Gas, fertilizer and auto are the first to see a revival.

During every budget we get to hear about suggestions to reinstate long-term capital gains (LTCG) tax on equity investments. Some say that exemption of LTCGT can lead to market manipulation. What are your views? If the government introduces LTCGT what would be the impact on markets?

The exemption of LTCGT has helped attract investors in equities. But that’s not the only reason why people invest in equities. They invest because they expect better returns. If there is money to be made in markets, I don’t think it would deter investors from this asset class. So introduction of LTCGT would not have an impact on long term investors. However, it could hurt the sentiments in the short run. We could see some curb in short term speculative money moving in stocks having weak fundamentals.

How has your investment philosophy evolved over the years?

While our broad philosophy has remained the same, we have started giving more attention to management quality while evaluating companies. Our time horizon of owning stocks has also increased and we are evaluating companies with a three-year perspective. There is a larger focus on how companies are generating free cash flows and how it is being utilized. These factors impact the PE multiples. So we are willing to pay a premium if these factors are favorable. To sum up, we have been incorporating these factors in our philosophy.

Your favorite book

One book which I found interesting is ‘Good to Great’ authored by Jim Collins. The book gives good insights into building an organization and focuses on what really matters to not only to survive and endure but to excel.

Source: https://goo.gl/i9ro1V

ATM :: How to become rich fast at a young age in India: 5 amazing investment strategies to follow before you turn 30

Everyone wants to be financially secure and well off by the age of 35-40. However, when we are in our 20’s, we tend to live life in the moment and forget saving for the future.
By: Sanjeev Sinha | Updated: November 27, 2017 2:25 PM | Financial Express

ATM

All of us have various financial goals in life. Everyone wants to be financially secure and well off by the age of 35-40. However, when we are in our 20’s, we tend to live life in the moment and forget saving for the future. This is not the right approach towards creating wealth. Therefore, to ensure that you are financially secure and on the right track with your money, here are 5 important investments that you must make before you hit your 30-year milestone:

1. Investment towards tax saving
Considering that you are working and earning, it is important for you to assess your tax liability and take advantage of tax deductions available under Section 80C of the Income Tax Act. “By proper tax planning, you can not only reduce your tax liability but also save some more to invest towards your other goals. One of the best tax-saving instruments is Equity-Linked Savings Schemes (ELSS). It is a type of open-ended equity mutual fund wherein an investor can avail a deduction u/s 80C up to Rs 1.50 lakh for a financial year,” says Amar Pandit, CFA and Founder & Chief Happiness Officer at HapynessFactory.in.

2. Investment towards emergency corpus
There are various events like accidents, illnesses and other unforeseen events that we may encounter in our lives. These events should never occur, but if they do, one needs to be adequately prepared for the same. In critical cases, such events may hamper one’s ability to work and may even lead to a loss in earnings for a few months or years. Hence, “it is advisable to build a contingency corpus, which is equivalent to at least 5-6 months of living expenses. Further, your emergency fund should be safe and easily accessible (liquid in nature) at short notice, in case of an emergency. Hence, savings bank accounts and liquid mutual funds are two options for setting aside the emergency corpus. However, considering that liquid and ultra-short term mutual funds are more tax efficient in nature, it is advisable to park a major portion of your corpus in the same,” says Pandit.

3. Investment towards long-term goals
It is very important to save and invest towards your long-term goals such as marriage, buying a house, starting your own venture, retirement, and so on. You must start with determining how much each goal will need and the savings required to achieve the goal. Once the corpus is fixed, you can invest towards the goal regularly. As an investment strategy, start fixed monthly investments – SIPs (Systematic Investment Plan) in mutual funds. Always remember, the earlier you start investing towards your goals, the longer time your investments will have to grow and the more you will benefit from the power of compounding. Equity mutual funds which are growth oriented are a preferable investment option for long-term goals.

4. Investment towards short-term goals
There are many short-term goals that are recurring in nature, such annual vacation, buying a car or any asset in the near term and so on. For such goals, you are advised to park your funds in liquid or arbitrage mutual funds rather than a savings account. “Mutual funds are more tax efficient than savings accounts and also there are different funds for different time horizons. For example, for goals to be achieved within a year, you can opt for liquid or ultra-short term funds whereas for goals to be achieved post one year, you can opt for arbitrage funds,” advises Pandit.

5. Investment towards health and life cover
Life and health insurance typically are not supposed to be considered as investments. However, both are very important and must be considered as one of the priority money move to be made before turning 30. If you are earning and have a family dependent on you, you must assess and buy the right life insurance term cover for yourself. Further, with costs of health care and medical on the rise, any untoward illness without sufficient cover will have you dip into capital which is unnecessary. Hence, there cannot be any compromise on health insurance. Thankfully, there are various health covers available in the market today. You should opt for the right cover for yourself, depending on your needs and post considering all the options.

Source: https://goo.gl/Abf7TR

ATM :: How to choose Mutual Funds or Stocks for your investments

By pooling a lot of stocks or bonds, mutual funds reduce the risk of investing.
By ZeeBiz WebTeam | Updated: Wed, Nov 29, 2017 12:59 pm | ZeeBiz.com

ATM

Both stocks and mutual funds market are booming in India, but as an investor, we are often confused to choose between the two for our investment plans.

Investment in equity, bonds or funds comes with higher risk and higher reward, therefore, it is always better to first study about the scheme we plan to invest.

Mutual funds:

Mutual fund scheme is a pool of savings contributed by multiple investors. The term ‘mutual’ fund means that all risks, rewards, gains or losses pertaining to, or arising from the investments made out of this savings pool are shared by all investors in proportion to their contributions.

There are wide-range of mutual funds in India like – equity, debt, money market, hybrid or balanced, sector-related, index funds, tax-savings fund and lastly fund of funds.

Stock Market

Stock market are usually interesting source of income for both companies and share holders. Under the stock market, anyone can buy stakes of a company in whom they have faith.

Companies which have received better ratings by agencies are generally preferred the most. No matter what may be the circumstances, an investor holds on to the company’s stake for their regular source of income.

Which one is better for investment?

According to Motilal Oswal, if you are typically in your 20s to 30s belt, you can start building your investment portfolio with the help of mutual funds. You need to start off with a very minimum capital and you can find that your investment keeps growing at a gradual space.

The agency believes that for first-time investors, the mutual funds offer a tremendous scope for growth as your funds are invested in diversified forms of revenue generating sources.

On the other hand, Motilal believes that if an investor belongs to late 40s up until 70s of their age and are also seasoned investors, then investing in stocks is a good idea.

It further said that decades of exposure to the financial market helps you gauge the right type of equities, shares or stocks, you need to invest your money in.

Among many advantages of investing in mutual funds is that you can appoint fund managers to select funds, track performance, make appropriate asset allocations and cash-in your profits for you.

These managers try to ensure that an investor’s portfolio consists of well-performing funds, rather than those that might drag down the overall investment returns.

In case, you are stock market investor, and sell your holding within a period of one year, then you have to pay 15% as short-term capital gains tax.

As for mutual funds, there are no gains tax levied on the stocks that are sold by the fund. But one needs to remember that an investor must hold equity funds for a minimum of one year (the longer, the better, really) if they want to avoid paying capital gains tax on the investments.

If you venture into stock investments on your own, brokerage costs of 0.5-1% will be a common expense. Apart from this, you will also have to pay for demat charges.

BankBazaar stated that mutual funds pay only a fraction of the brokerage costs compared to what is charged to individual investors. Investors in Mutual Funds do not need demat accounts.

A well-diversified investment portfolio ideally has around 25-30 stocks, and this kind of portfolio is only achievable with a sizable corpus.

With investment in mutual funds, an investors can buy a certain number of funds which can be invested in various stocks.

Source: https://goo.gl/8BtHrp

ATM :: Worried about leverage? Check out these top 15 zero debt companies which rose 60% in 2017

Kshitij Anand | Sep 01, 2017 08:15 AM IST | Moneycontrol News
Stocks which have zero debt/equity ratio include names like Jubilant FoodWorks which gained 59 percent, and Bata India rallied 50 percent so far in the year 2017.

ATM

The word ‘leverage’ as a term has become more of a worry for investors especially after the recent crackdown of the Reserve Bank of India (RBI) on companies with excessive debt on the books.

In the month of June, RBI identified 12 accounts accounting for 25 percent of gross bad loans in the system for immediate bankruptcy proceedings. And, earlier this week, media reports suggest that the central bank is coming out with another list.

The Reserve Bank of India has sent the second list of over 40 large corporate defaulters that include Videocon, JP Associates, IVRCL and Visa Steel, among others, to be referred to the National Company Law Tribunal (NCLT), CNBC-TV18 reported earlier this week quoting sources.

The term ‘debt’ is not essentially bad because to run operations companies do require money to invest into assets, working capital, buy new machinery etc. which would help in improving margins, increase productivity and boost profit.

“Having high debt on the books is not a negative as long as the cash generation out of the usage of the borrowed funds is sufficient enough to service the debt and leave something for the equity shareholders (to compensate them for the risk),” Deepak Jasani, Head – retail research, HDFC Securities told Moneycontrol.

“Typically debt borrowed for investment in commodity sectors at boom times (no distinctive product) or in a Govt subsidised (subsidy on capex/tax or on interest) sector has a chance of creating servicing issues for the borrower (and NPA issues for the lender),” he said.

The S&P BSE Sensex rose by about 20 percent so far in the year 2017 and plenty of small and midcap stocks have more than doubled in the same period.

Among the S&P BSE 500 stocks, we have taken 15 stocks with zero debt across various sectors which have given up to 60 percent return so far in the year 2017. 12 out of 15 companies outperformed Nifty in the same period.

15

Stocks which have zero debt/equity ratio include names like Jubilant FoodWorks which gained 59 percent, and Bata India rallied 50 percent so far in the year 2017.

Other stocks which rose between 20-40 percent include names like Colgate Palmolive which rose 22 percent, followed by Greaves Cotton rose 22.2 percent, and Whirlpool India gained 31 percent in the same period.

“Debt is an important component for companies to expand its business beyond geographic reach which finances the capital expenditure. It provides an opportunity for companies to increase its productivity as well as revenue share through its boom,” Dinesh Rohira, Founder & CEO, 5nance.com told Moneycontrol.

“But, with increasing loan defaulter at realm coupled with broadening size of NPA in the economy, the financial health is currently at the edge of eruption. Further, a recent crackdown by RBI on companies with huge debt obligation has escalated concerns for investors to realign its portfolio,” he said.

Things to know when you invest in a Zero debt company:

Ideally, a part of your portfolio should be invested in zero debt or companies which are low on leverage because they might withstand any crisis. They may not turn out to be great when you compare the performance with companies which have slight leverage on their books.

Hence, a part of your portfolio should be in zero debt companies while the rest should be in growth stocks. The strategy will act as a hedge against volatility.

“Low debt or debt free company is not always a good option for investment as there are certain factors which are on backend such as sector growth, economic growth, and credibility of the promoters,” Ritesh Ashar – Chief Strategy Officer, KIFS Trade Capital told Moneycontrol.

“Using conservative approach on interest expense the company may be sacrificing the growth prospects & this can be a disadvantage to its competitors which tap the growth opportunity in the sector by pumping debt,” he said.

Other parameters to track apart from D/E ratio:

There are various other parameters which investors should track before putting money in companies apart from just looking at the debt and equity ratio.

“Investor should scrutinize that every borrowing is aimed at improving fundamental rather than meeting an old obligation. Few financial leverage ratios such as debt-to-equity, interest rate coverage and debt service coverage should be compared with an industry standard to arrive at a logical conclusion,” said Rohira of 5nance.com.

Ashar of KIFS Trade Capital said that investors’ attention to a level is acceptable which can be seen through Interest Coverage Ratio, Debt Equity ratio & ROCE vs Interest rate charges.

“Leveraged companies face issues of cash crunch and repayment of loans whereas zero debt companies are free from these hassles. As the interest rate increases the lending becomes expensive and dilutes profitability,” he said.

Source: https://goo.gl/KQqr6P

ATM :: 5 reasons why mutual funds have tanked up on banking stocks

Despite the red flags staring at most Indian banks, mutual fund managers do not seem to bother about them. Reports say that the allocation to the banking sector by mutual funds has reached an all-time high of Rs 1.47 lakh crore at the end of June.
Shishir Asthana | Moneycontrol Research | Jul 28, 2017 06:14 PM IST | Source: Moneycontrol.com

ATM

In a recent survey conducted by Moody’s Investor Service, 70 percent of market participants pooled said that India’s banking system was the most vulnerable in South Asia. Stress in the banking system has made headlines for over three years now. Analysts, experts, and economists have all predicted doomsday which has not yet come. However, to be fair to experts the balance sheet numbers of the banks have continuously deteriorated in most of the cases.

Despite the red flags staring at most Indian banks, mutual fund managers do not seem to bother about them. Reports say that the allocation to the banking sector by mutual funds has reached an all-time high of Rs 1.47 lakh crore at the end of June.

Why would funds like to invest in banks which everyone fears will implode? Here are five reasons we think banks are on mutual funds’s radar.

Valuation: Given the current valuation in markets, very few sectors offer a good risk-reward bet. With Nifty over 10,000 and market price-to-earnings in the top quadrant, there are few sectors and stocks that offer value. While Bank Nifty has touched a new high of 25,030, there are stocks in the sector, especially in the public sector space, that offers better valuation but higher risk.

Liquidity: Mutual funds in India are witnessing heavy inflows. New investors and higher investment through systematic investment plan (SIP) is compelling mutual funds to take more risks. Despite record investments in the banking sector, mutual funds are still sitting on cash levels of 5.7 percent on an aggregate basis. Some funds have cash positions ranging between 8-18 percent. Peer pressure and rising markets compel them to invest.

Index weightage: One parameter that every fund manager is ranked on is his performance with respect to the index. As weightage of banking stock in the index is high at near 30 percent, fund managers are compelled to buy banking stocks in order to be close to the index performance.

Too precious to fail: Though asset qualities of most banks are questionable these banks are all too big to fail. For the government and the central bank, it will be very embarrassing to allow a bank to fail. Both the central bank and the government have been trying to recapitalise banks, tweaking the rule books, bringing in new schemes to help banks clean up their books. Bankruptcy law is now cleared and cases are registered. This is expected to go a long way in recovery and solving the problem with bigger non-performing assets. Apart from these measures, the government has also initiated merging of weaker banks with the stronger ones, in turn, creating a bigger and stronger bank.

Proxy for growth: The banking sector has traditionally been considered as a proxy for the economy. Every activity in the economy requires money. Banking sector credit growth has historically been between 2-2.5 times GDP growth. However, with the toxic asset problems and other sources of non-banking finance available in the market, the ratio has fallen to nearly 1.6 times the GDP. This ratio is expected to improve as banks start lending again in line with the growth in the economy.

Source: https://goo.gl/fRA8CU