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The payments ecosystem remains strong in terms of credit card (count, spends, receivables per card), monthly Paytm data (GMV, merchant addition, credit distribution) and UPI data (more than 10bn transactions in Aug’23). SBI Cards (SBIC) added 0.21mn credit cards in Jul’23, while Paytm added 0.5mn subscription-paying merchants in Aug’23. Overall credit cards (CC) in force is closing on 90mn while credit/credit card on UPI is also gaining traction.

India’s derivatives’ volumes have been surprising on the upside for past many years. This is best captured by the fact that derivative to cash volumes in NSE as of Jul’23 is 421 times vs 36 times of Germany (closest in that metric) in Jul’23. This has been accomplished by a structural trend of increasing penetration in tier 2/3 cities with rising digital brokers along with increasing financialization and expanding retail penetration.

Collection efficiency across MFIs under our coverage remained robust during FY23, sustained in Q1FY24 and we believe it would remain robust going ahead despite 4 major state elections – Chhattisgarh & Madhya Pradesh (MP) in Nov’23, and Rajasthan & Telangana – in Dec’23.

With rising volumes in derivatives, exuberance about the related revenue prospects must be tempered with the evolving change in option premium rate as a percentage of notional turnover. With rise in derivative volumes, a large portion of the contracts are close to expiry, which means the premium yield is low.

MFI players witnessed sharp recovery in profitability during FY23 as reflected in average RoA at 3% vs <1% in FY22 for most players. Profitability was driven mainly by credit cost moderation and improved core business performance, while higher direct assignment income and fees & commission also boosted earnings.

Indian exchanges reported a strong July 2023. This is evident from growth in equity derivatives (more than INR 3trn ADTV), cash (back to more than INR 700bn ADTV) and robust commodity options in MCX (adjusted total volumes taking futures and 40% of option for revenue equivalence at INR 478bn for Jul’23 vs INR 294bn/370bn in FY22/23).

Payments ecosystem remains strong in terms of credit card (count, spends, receivables per card), monthly Paytm data (GMV, merchant addition, credit disbursement) and UPI data (transactions/value up by 59%/46% YoY to 9.3bn/INR 14.8trn in Jun’23).

The transition from offline/traditional to digital to ‘assisted offline’ is manifesting in an accelerated manner across financial services, and especially in distribution of financial products.

Growth in payments remained strong in May’23 as seen from: (1) total CC spends of Rs1.4trn during the month (up 6% MoM) and likely to have remained largely stable in Jun’23; (2) industry receivable per credit card stood at ~Rs23k in May’23 (down marginally by 1% MoM).

Jun’23 has been a strong month for capital markets. Total cash volumes were up 5.8% MoM while NSE derivatives volumes increased 2.4% MoM and traction around MCX options volumes continued.