Indian markets declined in second half of the session on Monday, even as Finance Minister Nirmala Sitharaman announced relief measures for the Covid-19 hit economy, which is now bracing for a possible third wave.
After hitting a lifetime high of 53,126 in early trade, Sensex slipped into the red to end at 52,735, down 189 points or 0.36%.
Finance Minister Nirmala Sithraman on June 28 announced 8 economic relief measures to help tide over the economic impact of the covid-19 pandemic. The finance minister announced job benefits, extending the Atmanirbhar Bharat Rozgar Yojana and loan guarantees for covid-affected sectors such as tourism.
It is an out of the blue fiscal stimulus. Focus is on MFI which has virtually stopped lending due to concerns on recoveries. With this stimulus more business for MFIs and easy availability of credit to buyers of white goods, vehicals etc. Financials should benefit. Tourism sector gets a boost. Hotel stocks should be in focus. As regards Nifty 15900-15950 was a barrier for several weeks now. Judging by today’s price action short positions would have been created. With this stimulus, interest of FPIs could increase. A move above 15,950 would scare out the shorts. Next couple of days could be interesting.
Markets may react to the announcements made by the Finance Minister (FM) in early trades on Tuesday which were primarily focused on boosting the economic recovery and supporting the vulnerable sectors and individuals impacted due to COVID. We reiterate our bullish view and suggest continuing with a stock-specific trading approach. Among the sectors, banking has the potential to trigger the next up move.
A lot of thought seems to have gone into FM’s announcements with a wide spectrum of the population intended to get reliefs. Although the total impact amount seems large at around Rs 6.29 lakh crore, a large portion of this is by way of credit guarantee schemes where there is no immediate outflow. However, the provision of credit guarantee oils the wheels of the respective focus areas enabling a faster return to normalcy.
Extension of emergency credit schemes by 50% to Rs 4.5 lakh cr with a focus on stressed sectors will be a boom for the straggling MSMEs. The subsidy financing by 2% interest rate below the RBI prescribed rate will be again for MFI, NFBCs and small borrowers, which are in dire need of falling NPAs & working capital.
The extended & new Atmanirbhar program is positive for the broad economy, especially rural, healthcare & hospitality sector, though unlikely to impact the market directly which will maintain its character.
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