Equity benchmarks managed to sustain positive momentum for yet another session on Wednesday but the upside gap narrowed down as market participants avoided taking risky positions just two days before the finance minister Nirmala Sitharaman presents her first budget for 2019-20 on Friday. Focus seems to be already shifting on stocks in infrastructure, consumer durables and consumption segments as most experts feel the government in order to revive economic growth via job creation would announce preferential allocations for these sectors.
State run banks have also emerged favourites as markets expect the recapitalisation programme to continue for next few years until these lenders not turn fiscally viable but also start showing robust profitability coupled with jump in credit growth.
Dalal Street looks forward to boost to infrastructure and revival of capex (capital expenditure) as well as investment cycle which is almost dormant. “Reserve Bank of India has already moved ahead by changing its policy stance (from neutral to accommodative) and took measures to address liquidity issues to support the economy. The government is expected to back RBI’s monetary efforts by providing fiscal stimulus and other bold remedial measures, ” said Sharekhan’s Sanjeev Hota. Nalin Shah of Kotak expects the government to set aside at least 1 per cent of the GDP for infrastructure.
The markets seems to have already factored in the excess RBI cash the limit of which would be recommended by Bimal Jalan panel set up by the central few months ago flows to the government coffers which is desperately looking to raise revenue to implement its ambitious social welfare policies as well as boost capital expenditure. Analysts say infra and other programmes are being finance by just government capex since the corporate capex cycle is mission for more than years.
Karvy Stock Broking’s expects the government to take balanced approach to tackle growth revival without compromising on fiscal math. Most brokerages see stocks such as Larsen and Toubro, Mahindra and Mahindra (tractors) and those of infra companies to rise post 5 July once the budget is presented to Parliament. other sector that awaits big boost is affordable housing.
The stock that is likely to rise is that of LIC Housing Finance , a government undertaking. The Prime Minister Narendra Modi has ambitious plan to provide homes to all by 2022. The contraction in India’s key purchasing managers’ index (PMI) for services sector in June to 49. 6 from 51.7 in May only confirmed market’s concern that slowdown in consumption and slump in demand have been the top reasons for economic slowdown.
The IHS Nikkei’s PMI Service Sector data released today by economist Pollyanna De Lima confirmed contraction for the first time since May 2018. The dividing line that separates expansion from contraction is 50. Even the composite PMI for June had slowed to 50.8 from 51.7. “It is somewhat surprising to see some companies linking subdued demand to high tax rates , two years from GST implementation, with hotel tax mentioned in particular. ” The conditions in Services sectors are likely to see slowest upturn in first quarter (April-June) of FY 2019-20, said IHS market’ survey
Global issues are unlikely to impact trade in Dalal Street until next week, say analysts claiming equity movement will depend on budget proposals. State run banks could provide safe bets for fresh buying as well as profit booking, brokerages feel citing RBI’s affirmation that PSBs’ asset quality is no more under the burden of non-performing loans or NPLs as fresh slippages have stopped and quick recognition of bad debts is facilitating quick provisioning process.
The 30-scrip Sensex ended 39,839.25(+22.77) points up 0.06 per cent with 14 share ending up and 16 down. The Nifty closed 11,916.75(+6.45)points a rise of 0.05 per cent as 24 stocks advanced, 25 declined and one unchanged. Nifty PSU Bank settled at 3,255.65(+55.05) points up 1.72 per cent. Gainers in BSE benchmark included IndusInd Bank Rs 1,474.70, 4.11 per cent, ITC Rs 276.85, 1.13 per cent and L&T Rs 1,578.40, 0.96 per cent.