The government also rolled back the enhanced surcharge on capital gains tax for foreign portfolio investors (FPIs).
The stock markets on Monday saluted the government’s measures to revive growth with a stunning 793 points rally in the Sensex, which saw the benchmark close at 37,494.12. The re-bound in global markets—after a sell-off in Asia — on hopes of fresh talks between the US and China on trade tariffs also helped revive the sentiment at home. US President Donald Trump said on Monday the US and Chinese trade negotiators would “very shortly” resume talks in what he described as a breakthrough in the two economic superpowers’ trade war.
On Friday, finance minister Nirmala Sitharaman rolled out a raft of measures that are expected to ease the flow of credit to companies and individuals and stimulate consumer demand in sectors such as automobiles.
The government also rolled back the enhanced surcharge on capital gains tax for foreign portfolio investors (FPIs). The promise of more incentives to come — the FM is scheduled to make two more announcements — also cheered investors. FPIs have been paring exposure to Indian equities since the Budget on July 5 and have offloaded shares worth $3.25 billion, Bloomberg data showed.
On Monday, FPIs sold stocks worth around $105 million, according to a provisional data on the bourses. In particular, the Rs 70,000-crore capital infusion into state-owned lenders — which could translate into Rs 5 lakh crore of loans — saw the Nifty PSU bank index rise over 3%. Analysts said it was possible that interest rates would come down in the short term given the current surplus liquidity in the money markets and the Specific sops for the auto sector — a deferment of the registration fee, enhanced depreciation and a removal of the bank on government purchases of new vehicles — lifted auto stocks.
While Monday’s rally did reflect a change in the mood, the Street has been disappointed with the corporate results for the June quarter and is cautious about India Inc’s performance in 2019-20.
Analysts at Nomura wrote that the aggregate earnings for NIFTY have been cut by 15%-6% for FY20/21 since the start of FY19.” We do not rule out the possibility of a further 3-4% cut to FY20/21 consensus estimates on account of the ongoing slowdown,” they noted. Consensus now projects NIFTY earnings growth at 14%-19% for FY20/21. The analysts pointed out that overall, the results season disappointed the Street, with earnings missing estimates on already muted expectations. There has been acceleration in consensus earnings cuts after the current results season,” they wrote.
The positive sentiment in the markets on Monday rubbed off on most sectoral indices. Of the 19 sectoral indices, all barring the BSE Metal ended the day in green with BSE Finance advancing nearly 4%.That was followed by BSE Bankex and BSE Realty, both gained by 3.6% each.