Reliance Industries (RIL), HDFC Bank, HDFC, ICICI Bank and Infosys contributed the most to the indices' losses today.
The headline indices BSE Sensex and Nifty 50 failed to cheer the first tranche of the Rs 20 lakh crore stimulus to support Indian economy, which has been battered by a 51-day lockdown to contain the COVID-19 pandemic. BSE Sensex slipped below the crucial 31,200-mark to end at 31,122, while the broader Nifty 50 index breached the psychological level of 9,200, and settled at 9,142. Reliance Industries (RIL), HDFC Bank, HDFC, ICICI Bank and Infosys contributed the most to the indices’ losses today. The fall in the market was mainly on the back of the negative global cues as US Fed warned to prolonged recession in the US economy after coronavirus. The top losers on Sensex were Tech Mahindra, Infosys, HDFC, IndusInd Bank, RIL and Power Grid.
Why Sensex, Nifty failed to cheer FM Nirmala Sitharaman’s stimulus-
1. The announcements made by Finance Minister Nirmala Sitharaman yesterday were mainly on MSME relief schemes which addressed the liquidity issues in the system. “There were more loan disbursements, liquidity infusion, credit guarantees offered which together made up almost 90% of the corpus announced and just 10% of the corpus was in the form of stimulus from the government,” Pankaj Bobade, Head- Fundamental Research, Axis Securities, said.
He further added saying that yesterday’s FM presser was one in a series of three, the outcomes were below market expectations which has led to risk aversion in the markets today. “Markets would be cautiously watchful of the announcements in rest of the addresses to ascertain what is on offer by the government to kick-start the ailing economy. The markets would cheer only if there is something to drive growth in the economy, propel consumption or investments which I suppose the markets are eagerly waiting for,” Bobade added.
2. US Federal Reserve Chair Jerome Powell also hinted that the pursue of US central bank for a negative interest-rate policy are off-base, but vowed to use its power as needed and called for additional fiscal spending to prop up the virus-hit economy. “Fed Statment was strong to impact our markets,” A K Prabhakar, Head of Research, IDBI Capital told to Financial Express Online. “All stimulus things will not work for few months or even more,” he added.
3. Markets opened lower today and remained in negative territory throughout the session. “The global weakness and first round of stimulus announcements were not encouraging so markets opened lower. Failure of crossing key resistance of 9500 levels yesterday confirms a double top and weekly derivatives expiry further pushed the index lower,” Vikas Jain, Senior Research Analyst at Reliance Securities, said.
4. On being asked if the fine print of the stimulus package announced yesterday failed to impress the markets, Narendra Solanki, Head Fundamental Research, Anand Rathi Shares and Stock Brokers, told Financial Express Online that it hasn’t failed to impress. It was not on the expected lines with the markets. “This was first of the announcement so let’s wait for the remaining part as well. Yesterday’s announcements were more for supply-side and basic factor level cash flow was addressed. “While markets could be eying more for demand-side and kind of inflationary stimulus,” he added.
5. The market is a forward-looking animal that has already rallied from lows in expectations of some kind of stimulus and now the market is selling off when the economic package has been announced, says Amit Gupta, Cofounder, Tradingbells. “The actual problem of Covid19 and economic slowdown is still persisting and global market once again witnessing sell-off where the Indian market can’t remain in isolation for so long despite a big relief package has been announced,” Gupta added.
Expectations from FM presser today:
As the FM’s credit boosting measures didn’t bring any cheers in the market, it is evident that these measures aren’t sufficient to revive the industries, says Ravi Singh, VP- Research Head, Karvy Stock Broking, told Financial Express Online. “Considering the previous measures of banks on the moratorium announced by RBI, there might be fears that these credit measures might also turn against them as an additional interest burden. In today’s in the FM’s presser, market participants may expect measures for boosting demand. As the relaxed loan measures alone are not sufficient, they may also expect huge subsidies and tax benefits to the industries for the economy to revive,” Singh added.