Keep calm Mr Market! Stimulus package is coming sooner than later
The Finance Minister Nirmala Sitharaman might have disappointed those who were waiting for a stimulus package, but announced a slew of measures to support the economy, traders, businessmen, and the common man.
However, to calm the nerves of D-Street, Finance Minister categorically said that relief measures will come sooner than later, and the current announcements are also part of that plan. She further added that there is no need to impose a ‘financial emergency’ as was claimed by some reports.
Indian market which got off on a positive note tracking strong global cues build momentum in the second half of the trading session ahead of the FM press conference but saw mild profit booking towards the closing.
“Market seemed to breathe a sigh of relief today after the crash yesterday, in sync with the global markets. In addition to the huge relief package by the US Fed yesterday, there were also expectations of a fiscal package by the government,” Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.
“Market came off its highs after no significant announcements by the FM and the fact that the economic package was still in development. European and US manufacturing activity data due later, which may indicate the impact of Covid-19 on economies, could influence markets tomorrow,” he said.
Giving assurance to the market, FM assured investors and market participants said that the government is closely monitoring the situation. “SEBI has come up with guidelines and stated its position on the recent volatility. We are monitoring the stock market,” FM told reporters.
“On the financial market, the FM said all the regulators and RBI and MoF are working together to monitor the development of the market. We are consciously monitoring the stock market thrice in a day. A lot of inputs have come, the task force is also looking into them,” she said.
Finance Minister also gave relief to small-to-big corporates in terms of GST return filing, reduction in interest rates, holding board meetings for quarterly earnings, default under IBC etc.
The call for a big stimulus package has become louder because many economists across international rating agencies have lowered their growth forecast for India, and analysts at top brokerage firms have slashed their earnings forecast amid slowdown led by COVID-19 outbreaks across 190 countries.
The relaxation on TDS and GST for all companies is a positive development for the market. It is effective funding at 0.75 percent per month which will aid cash flows and give breathing space to MSME, small-cap and mid-cap companies to manage their cash flows better, suggest experts.
“Relaxation of board meetings by 60 days for the next 2 quarters is effectively giving relaxation to corporates to gradually work towards audited results. However, instead of this, I would have preferred to allow online / web-based participation of directors for board meetings rather than requiring the physical presence for all board meetings,” Vinay Pandit, Head Institutional Equities, IndiaNivesh told Moneycontrol.
“The relaxation under IBC for MSMEs is a big positive for BFSIs and NBFCs. Expect banks and especially NBFCs to react positively and sharply to this positive announcement,” he said.
Pandit further added that he expects positive reactions in Axis Bank, IndusInd Bank, Bajaj Finance and Bajaj Finserv along with other NBFCs focused on MSME lending.
Way ahead for markets:
It looks like the market is factoring a worst-case scenario and is near a bottom. For now, the swing low of 7511 recorded on March 24 will be crucial support and below that 7000 and 6800 levels are likely to lend support.
However, experts are not convinced that we have formed a bottom, and there are chances of further correction on D-Street even if a stimulus package is announced. The big positive for D-Street would be any news about a cure around COVID-19.
“FM made some announcements regarding relaxation on compliance-related issues which will be beneficial for public as well as for the companies but it won’t have any meaningful impact on the market while announcement regarding any economic package will have a significant impact on the market and FM has tweeted that economic package will be announced soon,” Santsoh Meena, Senior Analyst, TradingBells told Moneycontrol.
“The ultimate trigger for the bulls will be any positive news in front of Coronavirus. It is difficult to say about the exact bottom with high confidence amid such uncertain environment but I think the Market has discounted almost worst-case scenario and we are probably near to the bottom,” he said.
Meena further added that global markets are showing some signs of strength where if the exponential curve of coronavirus cases flattens out amid lockdown in India as well as around the world then we can expect a smart recovery in the market in the coming days.
Technically, the Nifty50 which witnessed a relief rally formed a High Wave kind of pattern on the daily charts which offer some hope for the bulls.
“A high wave-type candlestick pattern was formed on the daily chart at the new swing low of 7512 levels. This pattern signals some hopes for bulls to make a comeback from the lows. But, there is no confirmation of any bottom reversal at the lows as of now,” Nagaraj Shetti – Technical Analyst, HDFC Securities told Moneycontrol.
“The near term trend of Nifty is still negative and the upside bounce could be considered as a temporary before another round of fall. The next downside target of 6825 remains intact (which is an important bottom reversal of Feb 2016),” he said.
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