The equity benchmarks ~ the 30-stock Sensitive Index of the Bombay Stock Exchange and the 50-scrip Nifty of the National Stock Exchange ~ today staged a smart recovery, mainly due to huge short-covering ahead of the monthly (for June) expiry of futures and options or F&O derivatives series on Thursday
Analysts say rollovers (to next month’s series) or settlements are also crucial ahead of the Union Budget which will be placed in Parliament on 5 July by finance minister Nirmala Sitharaman.
Dalal Street’s expectations are high. Brokerages, mostly foreign funds, are asking for withdrawal of LTCG tax or longterm capital gain tax on all transactions of Rs 1 lakh and more. Some expect to raise the limit to at least Rs 2 lakh form the present slab. But experts feel markets are expecting too much citing the fact that the government is looking for more sources of revenue to meet its poll promises.
Besides, the government, as has been witnessed over past four years, has been financing most infrastructure projects across the country in the absence of private capex or corporate capital expenditure. Analysts feel there is no immediate sign of pick-up in private capex since corporate India like their lenders in public sector are struggling to set their balance sheets in order.
The Sensex held on to its intra-day gains and ended at 39,434.94 points, registering a gain of 311.98 points or 0.80 per cent. The Nifty finished at 11,796.45 points, up 96.80 points or 0.83 per cent. The Bank Nifty settled at 30,847.05 points, showing a gain of 245.00 points or 0.80 per cent. In the Sensex pack, 21 shares ended up and nine were down. For the Nifty, the advancedecline ratio stood at 35 versus 15.
Market expects boost to credit growth in the Budget which would be crucial to support economic growth recovery. The biggest hurdle in economic recovery, analysts say, is unresolved liquidity crisis facing non-banking finance corporations. This sector took a crippling knock in the aftermath of the collapse of Infrastructure Leasing and Financial Services or IL&FS in October 2018. The biggest shadow banking company crashed under unserviced debt burden of Rs 91,000 crore.
Reserve bank of India’s unstated reluctance to bail the NBFCs out has shifted attention to the government for rescuing NBFCs. Stock markets are being daily subjected to the vagaries of global as well as domestic uncertainties.
Mr Vikas Khemani, founder of Carnelian Capital Advisers, summing up the circumstances said: “If you see the current market situation, it is fairly fragile and chaotic and we are seeing mix news flows coming from all sides ~ global as well as local ~ and that has confused the market.
On one side, we have situation where there is lot of liquidity constraints, every day there are defaults kind of situation coming around, ratings downgrades happening and on other side we have the data of tax collection going up. So it is very very confusing situation.” Regardless of today’s relief rally, analysts feel, the genuine trigger for exchanges across the continents would come from the outcome of G20 meet scheduled later this week since several sensitive issues such as United StatesIran tensions and US-China trade stand-off would be discussed in details by heads of the governments. The volatility may persist at least till Friday.
Gainers in the BSE benchmark today included RIL at Rs 1,295.20, up 2.58 per cent; Axis Bank at Rs 780.30, up 2.29 per cent; Tata Steel at Rs 496.50, up 2.13 per cent and HDFC at Rs 2,172.15, up 1.07 per cent.