Capital market participants adopted a cautious stance after Finance Minister Nirmala Sitharaman unveiled the first set of incentives as part of the ₹20 lakh-crore stimulus package.
On Wednesday, after the stock markets closed for trading, the FM announced manysops for MSMEs, real estate, non-banking finance companies (NBFCs) and power distribution companies.
Market experts, however, cautioned that while certain sectors could see some amount of upswing, an overall market rally is unlikely to happen. “Equity markets are expected to appreciate the measures and not celebrate it with a big surge due to two key uncertainties, including mechanism to fund the relief package, and quantum of immediate outflow from the government coffers,” said Gaurav Dua, head, capital market strategy and investments, Sharekhan.
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Dhiraj Relli, MD and CEO, HDFC Securities, said while the markets could be disappointed as 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, sectors like banks, NBFCs, power generating companies and those with high linkages with MSMEs could see an uptick in their valuation.
Incidentally, the cautious view also came from the fact that the recent past had seen regulators and the government announce waivers and liquidity infusion plans for certain sectors but the market had been largely trading weak due to the growing number of COVID-19 cases.
“...we believe that the recovery will be slow and gradual for the Indian economy and we continue with our strategy of sticking to high quality business with revenue visibility like fast moving consumer goods, pharmaceutical, chemicals and agrochemicals and avoid vulnerable sectors like aviation, consumer durables, real estate hospitality sectors,” said Jyoti Roy, equity strategist, Angel Broking. adding providing a significantly larger stimulus in line with the U.S. may not be possible given the fiscal constraint.
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