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Last Updated : May 16, 2020 10:15 AM IST | Source: Moneycontrol.com

The weekly dossier: Here's what top voices have to say about the market, stimulus

So far, the steps announced by the government have focussed on MSMEs, PSU banks, agriculture and welfare of the poor, which is the need of the hour.

The market has completely cooled off after a Rs 20 lakh crore stimulus package was announced by Prime Minister Narendra Modi on May 12.

The Sensex jumped 2 percent the next day but erased all gains to settle almost 3 percent lower on May 14. On May 15, the 30-share pack fell over a percent in intraday trade but ended flat at 31,097.73.

So far, the steps announced by the government have focussed on MSMEs, PSU banks, agriculture and welfare of the poor, which is the need of the hour.

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However, experts are pointing to the disconnect between the market and the policy measures, so far.

Here's what eminent experts of D-Street said about the market:

Amit Shah, Head- India Equity Research, BNP Paribas

The majority of the measures from the government and the Reserve Bank of India (RBI) have primarily catered to increasing the liquidity. Market participants are expecting the RBI to announce measures to limit the asset-quality stress on banks’ balance sheets.

The government has used both fiscal and monetary measures to address liquidity and asset-quality concerns. However, the government is not really spending a lot out of its pocket, as largely all of the MSME relief in terms of loan guarantees, which will not be due at least for the next 12-18 months in terms of the first tranche of payment.

Vikas Khemani, Carnelian Cap Advisors (in an interview at CNBC-TV18)

Definitely there is always a possibility of further fall in the market. I am not denying. I think the current tone of the market, there is no doubt that we are in a weak economic situation, and currently what we need is a very swift sort of stimulus to the economy. And more importantly, than the announcement is the execution part. Like I think what the US has done, execution has done at the speed of light, first, they executed very well, going out, buying bonds in the market, their markets are already stabilised.

Ajay Srivastava, CEO of Dimensions Corporate Finance Services (in an interview at CNBC-TV18)

There is a wide disconnect, businessmen were looking for stimulus which is money to them in some form or shape of others whether payment of salaries or some other kind of money in their kitty. What has come in, in fact, some kind of hybrid plan to give more and more credit to industries? If we look at all packages announced by the government is basically lead to more indebted nations, more indebted businesses, more indebted farmers, more indebted street vendors.

Joseph Thomas, Head of Research, Emkay Wealth Management

The fine print of the Rs 20 lakh crore stimulus measures unveiled by Prime Minister Narendra Modi is positive but, might not be enough to fuel market sentiment and Nifty could retest lower lows once again.

Historically speaking, even in the Great Depression, the US market fell in the first phase, and then recovered and then it fell again before it could move up to record highs.

The Indian market could retest lower levels again and then reverse the trend. There is an overarching influence of global factors as well which are impacting D-Street.

Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services

The announcements made so far by the government on the Rs 20 lakh crore package have focused majorly on the supply side and investors fear that these measures may not result in a direct and immediate boost to demand, thus raising doubts over the country’s economic revival in the near term.

On May 15, the third tranche of announcements was for agriculture and allied activities - fisheries, animal husbandry, dairy, etc. covering 11 measures in total.

For now, the market seems to be focused on global cues and continues to remain under pressure as the muted earnings season so far and the relief measures announced by the government have not been able to boost sentiments. There is a fear of the second wave of pandemic spread and an extended period of an economic slowdown. On the domestic front, markets would now await the new norms of Lockdown 4.0.

Technically, Nifty may see a correction towards 9000-8800 zones. On the flip side, a major hurdle is placed at 9350 and then at 9500 zones.

Vinod Nair, Head of Research at Geojit Financial Services

The proposed stimulus package was met with skepticism by the market, on account of the execution of the proposed measures and the effectiveness of these measures to boost demand in the economy. The step by step disclosure of the package has also not found favor with an impatient market, waiting for a quick fix for the economy.

Worries about economies struggling to emerge from lockdowns, continuing infections around the world, the resurgence in US-China trade tensions were the global factors to impact the markets. In India, the rising case of virus infections shows no signs of abating, in spite of the high impact lockdown, and this is also weighing on the minds of investors.

The government will have to adopt a balanced approach because it will have to weigh the benefits of extending the lockdown against the high economic damage caused by it.

The government has made it clear that it will introduce the measures in tranches, but the execution is key and that will be followed by the markets. Markets will also be driven by the rate of infections, lockdown 4.0 norms and any stock-specific earnings commentary in the ongoing results season.

Vikas Jain, Senior Research Analyst at Reliance Securities

The third day of reforms are focused on agriculture and essential commodities act to be amended, it could benefit some agri related stocks but the bigger trigger and benefits for consumers and companies are missing. We do not expect any major positive up move. Global markets movement will be key to watch.

Ajit Mishra, VP - Research, Religare Broking

It seems like markets are awaiting further details before making any reaction and we may see the possible response on Monday, May 18. Besides, we probably have the new guidelines for the fourth phase of lockdown by then. Indications are pointing towards consolidation in the Nifty index wherein 8950 would act as a crucial support and 9300-9500 zone as hurdles. Amid all, we advise continuing with the stock-specific trading approach and suggest maintaining positions on both sides.

B. Gopkumar, MD & CEO, Axis Securities

FM's third tranche of announcements pertaining to the agriculture sector and fisheries are intended to strengthen the value chain and infrastructure. The government's thinking is long-term in improving the economic fundamentals in providing key support which can improve the supply chain, reduce wastage, and better price realisations.

This will help in the creation of employment and lead to long term demand creation. We do not foresee any major immediate benefits of the measures announced today but the long-term thinking of the government is clear. The impact on equity markets of these announcements is likely to be limited as benefits are back-ended.

Dhiraj Relli, MD & CEO, HDFC Securities

The third set of announcements by the FM consisted mainly of providing relief to the rural population. This included Fisheries, Animal husbandry, Agri infra, Micro food enterprises and Farmers.

The stimulus figure in this set was not very high and included some already announced spend and some fresh spending. Also, the timeframe of spends in some cases extends beyond the current fiscal.

The amendments to the Essential Commodities Act are the most exciting part. It is very welcome and can have a large beneficial impact on the Indian rural economy and its GDP if done fairly, transparently and swiftly. However one hopes that the states and/or traders lobby don’t put impediments in this plan due to political or commercial considerations.

Disclaimer: The views and investment tips expressed by investment experts 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.
First Published on May 16, 2020 10:15 am
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