Many public sector banks have locked their capital in insurance ventures. While some of their insurance business is doing extremely well, some are not. They could liquidate that asset and get capital.
Demonetisation was a great idea, which had three plans. Plan A was a hope that there is black economy in the system and all the cash will not come back to the banking account, that unwritten cash will be available to the government for spending and that’s how they will spend and create growth. The Plan B was that the government has started to execute is ensuring that the money, which has been deposited in the bank account, have they passed through the tax net or not. So Plan A and B will help the government get ₹ 50,000-60,000 crore additional tax of what was earlier expected. Plan C is also still possible. In the 1980s, China and India were virtually of similar size, per capita GDP. Today, they are five times bigger than us. Their credit to GDP ratio is substantially higher than India which allows them to create a higher GDP. Why we couldn’t create credit is because we were obsessed with keeping money in cash and gold. So this took money out of the banking system. With demonetisation, about ₹ 5 lakh crore has shifted from tijoris to bank account. Potentially with multiplier effect it can create ₹ 35 lakh crore credit, with which you can create additional GDP.
By the year-end the indices could head higher from here. We are positive on the maturity of the domestic investor, who has put more and more money in every downward correction. For a meaningful correction to happen, something should happen that the market is not aware of today. For example, if Doklam ends up into a far bigger issue than what the market is pricing in today then there could be a correction or if the Fed decides to go to Paul Volcker era then there could certainly be a meaningful correction in Indian markets.