Market last week
Market witnessed a mild recovery this week, as government clearly recognized the issues faced by the economy and announcing set of corrective and supportive measures. Nifty touched 11,023 after touching 10,637, broad based buying was seen across the sectors, led by financials, pharma and FMCG.
The initial set of measures has improved market’s sentiment while more will be required. Reversal of FPI’s surcharge, speedy recap of public banks by Rs70,000cr, additional support to housing finance by Rs20,000cr, tax relief to startups and payment of GST refunds to MSMEs additional depreciation of 15% for buying new vehicles and lifting the ban on the purchase of new vehicle by government to replace old ones, giving a momentum to the ground reality. The transfer of Rs1,76,051cr surplus from RBI has improved the finances of the government which is likely improve the spending from the government. Another announcement was consolidation of PSU bank, which is well managed decision having a direct push in the country’s financial system being accompanied by a good amount of PSUB recap. On global front, signs of effective communication between US-China team added positivity in the global market.
With reversal of surcharge, we may expect some revival in FPI flows. While consolidation and PSU recapitlisation is good step in right direction. However, this announcement is unlikely to change the sentiments of the market in the near-term. Given the current macro-economic scenario, weak corporate earnings, trade wars and slowdown in global economy, FIIs are likely to remain in a risk-off mode. The Q1FY20 GDP growth has sharply decelerated to 5% YoY versus 7.9% which is likely to negative for the market. Further, Auto sales data next week will also have impact on market, while the consensus expect the data to be weak. Nifty is likely to trade in range between 10700-11400.
Posted: September 2, 2019
Nirmala Sitaraman’s budget levies have decelerated the economy. The corrective steps taken subsequently are far from effective. She is not a politician with strong economic or financial acumen. A better choice for Finance portfolio was the current Commerce Minister Goel. Now Prime Minister Modi would do well to exchange the two portfolios between them.