1、 March 22, 2010 India Financial Services Rate Hike Should Normalize Yield Curve; Positive for Deposit-Rich Banks RBI raised interest rates by 25 bps on Friday; we maintain our Attractive industry view: In the near term, stocks could come under pressure as the market reacts to rate hike. However, we
2、believe that banks with a strong liability franchise stand to benefit from the rate hike and we would be buyers with our preferred stocks being SBI and HDFC Bank. We expect 100 bps of rate hikes this year (including the current 25 bps hike). We expect RBIs move to start the process of normalization
3、of the yield curve in India. The yield curve in India is the steepest in more than a decade. Normally, banks benefit when yield curves are steep they borrow short and lend long term. However, Indian banks with liability franchises felt negative impact. The cause for the steepness of the curve is the
4、 extremely low short rates. Indian banks are sitting on excess liquidity and they were investing in the short end. Short rates had increased a bit after RBIs CRR hike in January. As RBI raises rates, we expect short rates to move up more this will be good for banks NIMs. Over the last two months, lo
5、ng bond yields in India had started moving up meaningfully. One of the causes, in our view, was the buildup of inflationary expectations. With RBI not raising rates and IP growth picking up, there was concern that RBI was behind the curve and this was causing 10-year bonds to move up. With RBI raisi
6、ng rates, inflationary expectations may decrease, capping 10-year yields. This should help SOE banks stock performance, as it should help multiples expand. While stocks will likely react negatively to the rate hike we suggest adding to positions on dips. This move will help NIMs and RBIs action show
7、s that it is comfortable with the growth outlook good for loan growth. Our preferred stocks are SBI and HDFC Bank. On the other hand, NBFCs or wholesale funded organizations were benefiting from the wide yield curve. They will be negatively affected. Recent Reports Title DateIndia Financial Services
8、: Deposit Rate Hikes in the Offing A Process of Normalization Feb 22, 2010Anil Agarwal / Mihir Sheth / Mansi Shah India Financial Services: RBI Raises CRR by 75 bps Impact on Indian Banks Jan 29, 2010Mihir Sheth / Anil Agarwal / Mansi Shah India Financial Services: Rising Rates and Banks Stock Perfo
9、rmance Jan 25, 2010Mihir Sheth / Anil Agarwal / Mansi Shah Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research
10、. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report. += Analysts employed by non-U.S. affiliates are not register
11、ed with FINRA, may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Morgan Stanley Asia Limited+ Anil Agarwal Anil.A +852 2848 5842 Morgan S
12、tanley India Company Private Limited+ Mihir Sheth Mihir.S +91 22 2209 7073 Morgan Stanley India Company Private Limited+ Mansi Shah Mansi.S.S +91 22 2209 7820 MORGAN STANLEY RESEARCH ASIA/PACIFIC Industry View Attractive 渐飞研究报告 - http:/2 MORGAN STANLEY RESEARCH March 22, 2010 India Financial Service
13、s Exhibit 1 Trend in Policy Rates 2%3%4%5%6%7%8%9%10%Jul-01Dec-01May-02Oct-02Mar-03Aug-03Jan-04Jun-04Nov-04Apr-05Sep-05Feb-06Jul-06Dec-06May-07Oct-07Mar-08Aug-08Jan-09Jun-09Nov-09Reverse RepoRepoCash Reserve RatioSource: Company data, Morgan Stanley Research Exhibit 2 Yield Curve (10 Yr G-Sec 91-Day
14、 TBill). Normalization to Start -0.90.00.91.82.73.64.5Dec-98Dec-99Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08Dec-0910-year minus 91-day Tbill yieldSource: Bloomberg, Morgan Stanley Research Exhibit 3 Loan Growth (YoY) 5%10%15%20%25%30%35%Jan-07Mar-07May-07Jul-07Sep-07Nov-07Jan-08Mar-08May
15、-08Jul-08Sep-08Nov-08Jan-09Mar-09May-09Jul-09Sep-09Nov-09Jan-1015.8%Bank Credit Growth % YoY9.5%Source: RBI, Morgan Stanley Research Exhibit 4 Credit Growth vs IP Growth RBI Seems to Be Getting More Confident About Growth Outlook 5%11%17%23%29%35%Jan-99Jan-00Jan-01Jan-02Jan-03Jan-04Jan-05Jan-06Jan-0
16、7Jan-08Jan-09Jan-100.0%2.8%5.6%8.4%11.2%14.0%Credit Growth (% YoY, 3MMA, LHS)IP Growth (3MMA, Pushed Fwd 6 Months, RHS)Source: Company data, Morgan Stanley Research Exhibit 5 3 Months CP Rates Had Started Moving Post CRR Hike 3.04.45.87.28.610.0Feb-09Feb-09Mar-09Mar-09Apr-09Apr-09May-09May-09Jun-09J
17、un-09Jul-09Jul-09Jul-09Aug-09Aug-09Sep-09Sep-09Oct-09Oct-09Nov-09Nov-09Dec-09Dec-09Jan-10Jan-10Jan-10Feb-10Feb-10Mar-103M CP RatesSource: Company data, Morgan Stanley Research Exhibit 6 SOE Bank Performance vs 10 Year Bond Yield. SOE Banks Find it Tough To Perform When 10 Year Rates Are Rising 5.06.
18、27.48.69.811.0Jan-01Jul-01Jan-02Jul-02Jan-03Jul-03Jan-04Jul-04Jan-05Jul-05Jan-06Jul-06Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-106011016021026031010 yr bond (inverse scale, LS) PSU Banks Relative to Sensex (RS)Source: Company data, Morgan Stanley Research 渐飞研究报告 - http:/3 MORGAN STANLEY RESEARCH Marc
19、h 22, 2010 India Financial Services Morgan Stanley ModelWare is a proprietary analytic framework that helps clients uncover value, adjusting for distortions and ambiguities created by local accounting regulations. For example, ModelWare EPS adjusts for one-time events, capitalizes operating leases (
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23、 and Not-Rated to hold and Underweight to sell recommendations, respectively. Coverage Universe Investment Banking Clients (IBC)Stock Rating Category Count % of Total Count% of Total IBC% of Rating CategoryOverweight/Buy 1035 41% 316 42% 31%Equal-weight/Hold 1091 43% 341 45% 31%Not-Rated/Hold 22 1%
24、5 1% 23%Underweight/Sell 382 15% 89 12% 23%Total 2,530 751 Data include common stock and ADRs currently assigned ratings. An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations. Investment Banking Clie
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26、he next 12-18 months. Equal-weight (E or Equal) - The stocks total return is expected to be in line with the total return of the relevant country MSCI Index, on a risk-adjusted basis over the next 12-18 months. Not-Rated (NR) - Currently the analyst does not have adequate conviction about the stocks
27、 total return relative to the relevant country MSCI Index on a risk-adjusted basis, over the next 12-18 months. Underweight (U or Under) - The stocks total return is expected to be below the total return of the relevant country MSCI Index, on a risk-adjusted basis, over the next 12-18 months. Unless
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