Flight to safety by households may benefit banks, insurers

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By Nupur Acharya

Indian households will probably shift toward liquid and safer financial assets as concerns over income losses rise, ICICI Securities said in a note to clients.

“Financial intermediaries in sectors such as insurance and banks with strong brand loyalty, proven retail franchise, strong execution and clean balance sheets should benefit in current environment,” analysts Vinod Karki and Siddharth Gupta wrote in the note.

About 84% of Indian households saw their incomes fall last month under the world’s strictest shelter-at-home rules, and many won’t survive much longer without assistance, a study by the Chicago Booth’s Rustandy Center for Social Sector Innovation found. India’s economy is on course for its first annual contraction in four decades following the shuttering of millions of companies and job losses after strict social distancing measures were put in place on March 25.

The brokerage is positive on HDFC Bank, Kotak Mahindra Bank, SBI Life Insurance Co. and ICICI Prudential Life Insurance Co. as households may look to raise liquidity by keeping cash and bank deposits, along with buying protection for life and health.

“Demand for big ticket and lumpy discretionary spends such as tourism, leisure and expensive consumer durables could dip significantly,” the note said.

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