The Hindu Business Line : Analysts see positive opening, but feel follow-up action is key

Mumbai, Dec. 7 The stock market may react positively to the “stimulus package” in the short-term but it is unlikely to fuel a major recovery as the market was expecting a bigger package.

The market may gain some points on Monday, but a major rally is unlikely, said analysts and stockbrokers.

“The measures announced by both the RBI and the Government would help fuel demand in the economy but they are not adequate to give a ‘big push’ to the market,” said Mr C.J. George, Managing Director, Geojit Financial Services Ltd, a leading broking firm.

The major issue today is lack of investor confidence. The fiscal relief may result in reduction in prices of some products. But price is not the only factor. Small measures are unlikely to make a big difference. The market was expecting a much bigger package, he said.

These measures are good in terms of boosting growth but they will not have any immediate impact on the market. The measures taken shows that the Government is now serious about stimulating growth rather than controlling inflation, which was the concern a few quarters back, said Mr Dinesh Thakkar, CMD, Angel Broking.

Welcoming the measures, Mr Motilal Oswal, Chairman and Managing Director, Motilal Oswal Financial Services Ltd, said they will give a lot of relief to corporates and the market generally takes the cue from corporates. “In fact, these measures were overdue. These are welcome steps and will help sectors such as autos, textiles, and housing, which are facing a slow down in demand,” Mr Oswal said.

“These are welcome step and the markets should open positively on Monday. But unless these measures are followed by a series of other steps, specifically to address the liquidity in the economy, the fillip to the markets would only be a short-term one,” said Mr Waqar Naqvi, Chief Executive, Taurus Mutual Fund.

The markets will react very positively on Monday. The combination of monetary and fiscal measures announced will help large number of sectors, including auto, banking, infrastructure and textiles. The four per cent reduction in the ad valorem Cenvat rates, when passed on by the companies, will benefit the customers, said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Markets Ltd.

“The markets will open on a positive note but in the long-term the impact will depend on the execution of the measures. This is a very welcome move; especially the four per cent cut in ad valorem duty,” said Mr Raamdeo Agrawal, Director, Motilal Oswal Financial Services Ltd.

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