Expect the market to open on a dull note on Thursday, as the Finance Minister’s package of, what she called was the first series of the ₹20-lakh crore fiscal stimulus, failed to cheer market participants.

SGX Nifty at Singapore at 7 pm IST hovered around 9,384 after the Finance Minister completed making the announcement. The index was hovering around 9,424 just before she started the announcement. The Nifty 50 index on Wednesday closed at 9,384.55 on the NSE.

Market experts, who were expecting a tax concession and labour reforms, say they will now wait for further announcements from the Finance Minister and the government. However, most believe that today’s announcement would give some fillip to the MSME sector, which is the need of the hour. Markets could, on the one hand, be disappointed because the immediate spend out of the big fiscal stimulus is relatively small, and hence, there could be doubts on whether economic growth will revive soon and in proportion to the large number of the stimulus, said Dhiraj Relli, MD & CEO, HDFC Securities.

The announcement by the Finance Minister on Wednesday gave an overall contour of the first phase of the fiscal stimulus. Some clever structuring of the package ensures limited immediate impact on government spend/fiscal deficit.

Banks, NBFCs likely to shine

Sectors such as banks/NBFCs, power generating companies and sectors that have high linkages with MSMEs, could see an uptick in their valuation, though partial impact was already visible on Wednesday.

“Worry about rating downgrade could get postponed and we may have to see the next set of announcements by the FM to get a better handle on this,” he added.

Joseph Thomas, Head of Research, Emkay Wealth Management, said these measures will go a long way in instilling confidence in banks, financial institutions and investors in supporting the sections of business which actually require aid.

“The measures are more of supply-side and there is very little that is on the demand-side. Probably, the future announcements may contain a more balanced coverage of demand- and supply-side factors. Demand-side factors generally tend to work faster and are oriented towards the consuming unit directly,” he further said.

According to Suvodeep Rakshit, Vice-President & Senior Economist, Kotak Institutional Equities, the fiscal measures announced draws strongly upon the aim of providing liquidity and easing the functioning of key sectors.

“While fiscal cost is muted, it provides essential liquidity to MSMEs, NBFCs, MFIs, and HFCs. The first instalment of the fiscal measures will provide support to these sectors and could likely stave off few potential financial sector dislocations.”

According to Jyoti Roy, Deputy Vice-President — Equity Strategist, Angel Broking, more announcements are expected from the FM over the next few days. “We believe that the total fiscal and monetary package of ₹20-lakh crore (nearly 10 per cent of GDP) may not be enough and more needs to be done,” he said.

The US has so far announced fiscal packages of $3 trillion while the US Fed has provided monetary stimulus of $2.5 trillion since the beginning of the crisis, he added.

 

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