CLSA: Banks/Financials Moderate government borrowings, focus on infrastructure sector and capital infusion in PSU banks

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Focus on fiscal consolidation, a positive
FY12 fiscal deficit and market borrowings in line with
estimates.
This will prevent sharp rise in bond yields and support
growth in credit to private sector.
During FY12, government plans to infuse Rs60bn in PSU
banks with low Tier I CAR, generally smaller banks.
Cut in surcharge on income tax is ~1% EPS accretive.
RBI to issue guidelines for new banking licenses by Mar-11.
Cap on mortgage loans eligible for priority sector targets
raised by Rs0.5m to Rs2.5m- positive for HDFC Ltd.
Thrust on infrastructure and its financing:
IFCs can issue tax exempt infra-bonds in FY12.
Cap on FII investment in bonds issued by infracompanies
raised by US$20bn to US$25bn.
Government plans to set-up an Infrastructure
Development Fund with certain tax concessions.
No timeline set for Insurance Laws (amendment) Bill, 2008
that covers hike of FDI cap for the sector
Our top picks
ICICI Bank, HDFC Bank, HDFC Ltd and IDFC