Markets cheer stimulus package

Written by Markets Bureau | Mumbai | Updated: Jan 4 2009, 04:18am hrs
The stock market looks at the fiscal stimulus and the rate cut announced together extremely positively. While most of the players had factored in a stimulus package, the rate cut and the concerted effort both by the government and the Reserve Bank of India (RBI) at the same time is seen as a very positive signal for the investing community.

Pankaj Razdan, deputy chief executive, Aditya Birla Financial Services says, The second stimulus package is likely to boost economy and the markets sentiments. RBI decision to reduce will bring liquidity in the system. It will strike a right balance between the injection of the liquidity and earlier duty cuts (Cenvat) which may help the interest linked sectors like auto. The government has also opened an extra-line of liquidity in the economy by hiking the FII investment limit in the corporate bonds.

The markets are expected to remain positive in the near term. Corporate earnings are expected to cause some correction in the markets and this stimulus package will act as a support for the market not allowing it to have huge slides, says Nilesh Shah, deputy managing director and CIO with ICICI Prudential AMC.

Raamdeo Agrawal, Director, Motilal Oswal Financial Services Ltd says, Overall it will have a positive impact on the markets in the coming days. The financial sector will get major boost in this stimulus package. He further added that, there are expectations that, central bank might further take some strong measures during the quarterly review of monetary policy on January 27.

Saurabh Nanavati CEO of Religare Asset Management Company thinks that on the fiscal side, the government was constrained by the fiscal deficit to cut taxes directly or increase spending. Within our existing framework, they have taken the right steps of making IIFCL and the States as the intermediaries, who will transfer the liquidity from savers to borrowers, which is the biggest problem currently, Nanavati says.

The market is likely to open positive on Monday unless any adverse events take place over the weekend. And by the mid-week, the expectations of corporate earnings will start determining the direction of the movement, reckon trade experts. Real estate, construction and infrastructure related companies and select auto company stocks are expected to hog the limelight.