When rates rise, and the economy’s growth is strong, NIMs compress because competition for deposits rises and CoF increases. Floating rate loans are quickly repriced but fixed rate loans are not and thus NIMs contract. This is what happened with Equitas because as you said they are a majority fixed rate book.

When rates fall, this usually happens in a slowing economy, as the CB may have overtightened, the lender’s need for deposit growth is not as high as credit demand may not be as high as in the scenario above, thus lenders are quick to reprice deposits, CoF reduces. However, the lenders are in no hurry to reprice the loans and pass on the falling rate benefit 1:1. Thus NIMs usually expand in this scenario.

So the default state in a rate cut environment is NIMs expanding and not falling as you have mentioned.

Good overview of the recent Tax changes on different asset classes

Couldn’t find a Budget 2024 thread hence I have posted here

Recently, the Honourable Finance Minister tabled the Budget, which has received significant criticism. One major point of contention is the proposed uniform taxation on capital gains from equities, debt, real estate, and other assets. To understand why different taxation structures existed previously, we need to consider the key concept of “risk.”

For example, if someone buys company shares, a gold bar, and a house, even a layperson can see that the company’s shares have a risk of dropping to zero, whereas the other two assets do not. To attract investment in riskier assets, tax incentives were provided. As frequently reported in the news, substantial amounts of money have been flowing into the market during this bull run. The government wants to capitalize on this trend.

But is this fair? From a capitalist perspective, the answer is “Yes.” From a governmental standpoint, the answer is “No.” The government has a mandate to ensure smooth operations and implement policy reforms. In this case, the government appears opportunistic, hastily implementing new taxes and creating policy uncertainty. While such measures might be praised or accepted depending on political allegiance, haphazard taxation can drive away investors by creating investment uncertainty.

For context, consider the economic slowdown during 2017-2019 under BJP, and the scams from 2011-2014 under Congress.

Here are some possible outcomes of these policies:

• An external shock reduces liquidity, leading to a bear market.

• Economic slowdown stifles growth, resulting in a lackluster equity market.

• Market participants could form a voting block, demanding tax reductions (quite possible in India).

• This discontent could eventually lead to a change in the Finance Minister or even the government.

These scenarios are not listed in any specific order or timeline but represent potential consequences of the taxation policies.

I exited yesterday after holding for a year with minor losses.
I am very very bullish on credit cards. It is a secular theme and will have double digit growth for years to come. But Somehow SBI CC tested my patience. Credit cost is increasing consistently for 5-6 quarters. Turnaround may come but till asset quality doesn’t show improvement I am out of this counter. They are also loosing market share as well on top of increasing GNPA. I wish there there were other pure play CC companies.