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Banking Sector:
In the current fiscal (FY11), the Indian Banking industry has had to deal with tight monetary policy and low liquidity. This is despite the economy expected to grow at a healthy pace of 8.6% this fiscal. The central bank raised interest rates 7 times, cumulatively increasing the repo rate (rate at which banks borrow from the RBI) by 1.75% and the reverse repo rate (rate at which RBI borrows from banks) by 2.25%. However, with inflation still off RBI's target 7% for the end of FY11, further rate hikes are still expected.
Liquidity still remains a major concern, with the level of tightness currently beyond RBI's comfort level. The widening gap between credit and deposit growth was one of the major reasons for the same. Credit growth in the country has been rapid with non-food credit growing at 24.4% as per December 2010 data. This is against a projection of 20%, showing a huge demand for funds in one the world's fastest growing economies. However, deposit growth has lagged growing only by 16.5%, against a projection of 17%, leading to an unsustainable liquidity situation.
Automobile Sector:
De-licensing in 1991 put the Indian automobile industry on a new growth trajectory, which attracted foreign auto giants to set up their production facilities in the country to take advantage of various benefits it offers. Large middle class population, growing earning power and strong technological capability have been boosting automobile demand for past few years. Despite economic slowdown, the Indian automobile sector is expected to see high growth in coming years, especially in passenger cars segment, said our new research report, "Indian Automobile Sector Analysis. The passenger vehicle market, which constitutes around 80% of automobile sales, has immense growth potential as passenger car stock stood at around 11 per 1,000 people in 2008. Anticipating the future market potential, the
production of passenger vehicle is forecasted to grow at a CAGR of around 11% from 2009-10 to 2012-13. The recent launch of Tata Nano has brought about a new revolution in the countrys small car segment. Seeing the good initial response from consumers, many other players in the industry are chalking out their plans to launch cars in this segment in the next few years. Our research foresees a CAGR growth of around 12% in domestic volume sales of passenger vehicles during the forecast period. Other segments, such as two-wheelers, multi-purpose vehicle and light commercial vehicle, are also expected to witness fast growth in coming years.
FMCG Sector:
FY11 started off very well for the FMCG sector with companies showing solid growth and firm margins. However, as the year progressed inflation played spoilsport. As input costs continued to climb, margins of FMCG companies came under pressure. As a result of strong competition and the fear that high product prices would either trigger down trading or demand destruction, FMCG companies took judicial price increases. While this resulted in strong top line growth, margins of companies witnessed downward pressure. Sharp increase in advertisement expenses also put pressure on margins of these companies.
Telecom Sector:
The Indian telecom industry has continued with its strong subscriber additions during the current year. At the end of December 2010, the total subscriber base stood at nearly 747 m, of which wireless subscribers contributed to nearly 94%. During March 2010, this figure had stood at about 578 m. The key reason for such a growth in subscriber base has been the affordability factor. With almost 15 operators competing for subscriber share, tariffs have been declining. Therefore while companies have added subscribers to their base, the benefits of the same have not really
reflected in their financial performances. Added to this has been the burden of the interest costs related to the huge amounts of debt that most companies have taken on to fund the 3G spectrum fee. This has led most companies to operate on very thin margins.
Retail Sector:
The Indian retail market, over the last decade, has shown greater acceptance for organised retailing formats. Domestic retailing is emerging from a multitude of unorganised family-owned businesses to organised modern retailing. Rapid urbanisation, changes in shopping pattern, demographic dividend and pro-active measures by the Government are abetting the growth of the retail sector in India. Sector Highlights: Indian retail sector accounts for 22% of the country's GDP and contributes to 8% of total employment Hypermarkets, currently accounting for 14% of mall space are expected to witness high growth Demographic dividend with over 50% of country populace under 25 years of age is a prime driving factor for modern retail sector The report has been prepared through extensive secondary research supported by detailed analysis and focuses on market details, growth trends, major players, recent developments and key drivers. The report also discusses modern retailing formats and mall space distribution. This report can be used as an Information & Management Tool and is ideal for overseas investors to get the first feel of the retail sector. Senior managers, apart from gaining insight into the retail sector, can also use this report for making presentations to internal audiences, customers, collaborators and channel partners.
Steel Sector:
The Indian steel sector has witnessed a roller coaster ride of late wherein it has witnessed a significant spurt in demand due to expanding oil and gas sector, large infrastructure spending coupled with growth in housing, consumer durables and auto sectors. India became the fourth largest producer of crude steel in the world in 2010 as against the eighth position in 2003 and is expected to become the second largest producer of crude steel in the world by 2015. As per World Steel Association (WSA), India was the fourth largest producer of crude steel during JanuarySeptember 2010 producing produced 50.1 m tonnes (MT) crude steel during the period. Currently, with the governments increased emphasis on infrastructure, we believe the sector is poised for significant growth over the medium to long term. As a matter of fact, Indias per capita steel consumption continues to be low at 46 kg as against the global average of 198 kg. Thus, this further strengthens our belief that the potential ahead for India to raise its steel consumption is high. The domestic steel industry, which raised prices in wake of some stimulus measures being withdrawn after the last budget, has warned of another price hike if stimulus is completely withdrawn in Budget 2011-12.