Gaurav Garg of CapitalVia feels the LTC and reintroducing of Special Festival advance scheme for government employees are expected to boost the consumer demand by additional Rs 36,000 crore.
Measures to boost the economy were announced by the Finance Minister Nirmala Sitharaman on October 12, ahead of the festive season. But experts feel the quantum is much less than needed.
"It is an earnest attempt to revive demand; however, Rs 36,000 crore (and if private companies comply with the same, the total would be Rs 1 lakh crore) is not likely to be sufficient to move the needle. The recovery in demand is likely to be ephemeral and thus not likely to be reflationary in nature, i.e., having a low demand push impact on inflation," Emkay said.
"The real impact of capital spending by the government needs to be over a couple of years to actually aid in moving the investment cycle needle and the spending boost needs to be more from states rather than centre," the brokerage added.
The pent-up demand seems to be ending soon, which is why the government and RBI announced measures to support the economy. The market welcomed RBI's liquidity and regulatory measures last week, but small pre-festive package could not cheer the market much on October 12 as the benchmark indices ended with moderate gains.
The BSE Sensex and Nifty50 rallied more than 10 percent in nearly three weeks, but did not see major correction yet.
The continued momentum seen in the market largely could be due to the expectations of better earnings in September quarter, experts feel.
The Centre is going to provide cash vouchers to government employees in lieu of LTC (Leave travel Concession) allowance which could be spent on purchasing goods attracting GST rates of 12 percent and above. In addition, it is going to mainly provide incentive to government employees to spend during the festive season. The interest free advance of Rs 10,000 per employee will come as a pre-paid Rupay card and government employees need to spend it by March 31, 2021 (i.e. reintroduction of Special Festival advance scheme for government employees which was stopped previously.). However, the total spending on this is estimated to be just Rs 4,000 crore.
Central government is also going to spend additional Rs 25,000 crore (on top of Rs 4.13 lakh crore announced earlier) on infrastructure projects namely, roads, defence, water supply and urban development. The Central Government will also provide Rs 12,000 crore interest free loans of 50 years to states for spending on capital projects.
These are major announcements of the package. Experts feel with the additional cash in hands of consumers and additional spending on infrastructure, sectors like FMCG, consumer discretionary, auto, infrastructure, defence etc are likely to be benefitted and total 21 stocks are expected to get positively impacted from the pre-festive package.
Jyoti Roy, DVP-Equity Strategist at Angel Broking believes that the Government's move to provide interest free advances and LTC vouchers will put additional cash in the hands of the consumers which will benefit the FMCG sector and small ticket consumer discretionary the most. The Government's move to increase budgetary outlay on capital expenditure will be beneficial for the Infrastructure sector to some extent, he feels.
Rusmik Oza, Executive Vice President (Head of Fundamental Research - PCG) at Kotak Securities told Moneycontrol the first announcement may not add much to the demand as the amount being spent is on the lower side. "The second announcement could be positive for infrastructure, defence and construction companies like L&T, Bharat Electronics, PNC Infratech, NCC & Sadbhav Engineering,"
According to Gaurav Garg, Head of Research at CapitalVia Global Research, the proposed stimuli and the festive season together are expected to have positive impact on a wide range of stocks as this stimuli is believed to increase the demand during the upcoming festive season e.g. airlines like InterGlobe Aviation, auto sector stocks like Hero MotoCorp, Maruti Suzuki, Bajaj Auto because it is common for most of the people to plan purchases of vehicle during this festive time of the year.
"Capital and white goods stocks like Bajaj Electricals, Voltas, Blue Star, Whirlpool have always been stars of this season. Therefore, with increased stimuli from the government this segment should not be ignored. Textiles stocks like Grasim, Raymond, Century Textiles must also be kept on radar along with jewellery stocks like Titan Company as clothing & apparels along with jewellery are always the core component of the festival shopping for most of the Indians," Garg said.
Vineeta Sharma, Head of Research at Narnolia Financial Advisors also agreed with Gaurav Garg, saying the demand revival may be seen in consumer goods segments like- autos, mobiles, and other household goods. "Companies in the segment that will be getting benefited would be Maruti Suzuki, Hero MotoCorp, Dixon Technologies and Whirlpool.
Having said that given sharp run-up in stocks prices and premium valuation we believe that upside is limited, in the short to medium-term, he feels. In Infra, she is positive on Larsen & Toubro, PNC Infratech and in defence - Bharat Electronics and Dalmia Bharat.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.