Measures such as removal of surcharge on foreign portfolio investors (FPI) and removal of CSR violation as the criminal offence will cheer market participants
Finance Minister Nirmala Sitharaman on August 23 unveiled a slew of measure to boost growth, increase liquidity, and revive consumer and investor sentiment in the Indian economy.
The announcement couldn’t have come at a better time as the Indian businesses have reported a muted earnings in June quarter. Coupled with a trade war that could lead to the global recession and corporate governance issues, it has dented sentiment.
Measures such as removal of surcharge on foreign portfolio investors (FPI) and removal of CSR violation as the criminal offence will cheer market participants.
"The withdrawal of an additional surcharge should help shore sentiment amongst foreign investors. The tax situation had made India less attractive than our peers in the emerging markets space. FPIs have been withdrawing money from the Indian capital markets ever since the budget, this should slow down and hopefully stop the outflow from Indian markets," Nikhil Kamath, Co-Founder & CIO, Zerodha told Moneycontrol.
"A reduction in the LTCG and STCG should also aid sentiment in the short-term. The slowdown in the industry looks systemic, and while this could be a good start to stimuli, a lot more has to be done to turn the economy around," he said.
Deferring the increase in registration fee till June 2020 on new vehicles, the decision to review scrappage policy and linking vehicle loan rates to repo rate will help in reviving the auto sector.
"Delating the revision of one-time registration fees till June 2020 is a very important boost to the sector as this would have had a significant impact on demand in the short term. The costs would have gone significantly up," Ashwin Patil, Senior Research Analyst (Auto Sector) at LKP Securities said.
"The step is positive for 2-wheeler, 3-wheeler and personal vehicles. The revision of depreciation rate for all vehicles—from 15 percent to 30 percent for vehicles purchased up to March 2020—will give a big boost mainly to the commercial vehicle (CV) industry considering the extreme stress on the manufacturers, dealers, buyers and the entire value chain of CVs," he said.
Measures for the banking industry—immediate infusion of Rs 70,000 crore in public sector banks, additional liquidity support to housing finance companies and establishing task force to finalise Rs 1 Lakh crore infra investments—will go a long way in reviving investor and consumer sentiments, say experts.
“Upfront release of Rs 70,000 crore to PSU banks would create credit expansion to the tune of Rs 5 lakh crore. Credit growth of PSU banks will get a sizeable boost,” Anusha Raheja at LKP Securities told Moneycontrol.
“Banks have agreed to transmit the reduction of repo rate into credit markets by reducing their MCLR rates. Credit demand should get some boost and lower interest rates will also be beneficial for NBFCs,” she said.
Raheja further added allaying concerns of the auto sector should also be helpful for banks and NBFCs in general.
Here is a list of stocks that most experts feel may benefit the most from the stimulus package introduced by the Finance Minister:
Vinay Pandit, Head - Institutional Equities, at IndiaNivesh Securities Limited
We expect banks, NBFCs, housing finance companies, auto and consumption stocks to come back in flavour. We continue to be positive on major automakers—Maruti Suzuki, Hero Motocorp, TVS Motor and Bajaj Auto.
Among the consumer durables companies, we are positive on Blue Star as our key pick followed by Voltas. We are also positive on RBL Bank, ICICI Bank, SBI and Axis Bank. Banking stocks will see a strong relief rally in the next week.
Mustafa Nadeem, CEO, Epic Research
The surprise was the recapitalisation of banks that was not expected at this point in time. We rather expected sector-specific measures, which would have been related to automotive, consumer space or so. PSBs like SBI, BOB and PNB may see some incremental improvement in their net-interest margins.Romesh Tiwari, Head of Research, CapitalAim
Markets will surely appreciate these much-needed decisions. Tata Motors, Ashok Leyland, DLF, SBI and other public sector banks will see a good rebound. The second half of tomorrow's market will be interesting as that will decide the sustainability of the bounce of August 23.William O’Neil India
According to O’Neil methodology, we will wait for the Nifty to close above August 23 low of 10,638 for two more days to shift the market status to a rally attempt, after which we can take fresh positions.
We recommend investors to use these turbulent times to build a portfolio of companies with moats in their business and ability to withstand technology disruptions. Maruti, Ashok Leyland, L&T, Siemens, HDFC Bank, Cholamandalam Finance are likely to be direct benefices of the stimulus package from the Finance Minister.Disclaimer: The views and investment tips expressed by investment experts and brokerages on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.