Markets to make strong start on govt package to boost economy

25 Oct 2017 Evaluate

The Indian markets extended their gains in the last session on earnings optimism and amid muted cues from Europe. Today, the start is likely to be strong and the benchmarks will be extending gains on supportive global cues and on domestic factors. The PSU banking stocks will keep buzzing with the Union Cabinet approving a massive recapitalisation plan for public sector banks (PSBs) worth Rs. 2.11 lakh crore. Of this amount, Rs. 1.55 lakh crore would be raised through recapitalisation bonds. Another Rs. 76,000 crore would be available from budgetary support and raised through market borrowings. The whopping Rs 14 lakh crore package announced by the Union Cabinet apart from the massive recapitalisation plan for public sector banks, also include investments in key development sectors such as Rural Roads, Housing, Railways, Power, Highways and Digital Infrastructure. Traders will also be getting some support with Union Finance Minister Arun Jaitley’s statement that the Indian economy was on a strong wicket with sound macro-economic fundamentals. The IT sector stocks too will be in action reacting to the Infy numbers, which reported a net profit of Rs. 3,726 crore for the quarter ended September 30, 2017, up 7 per cent sequentially and 3.4 per cent year-on-year. But, the Nasdaq-listed company has cut its full-year revenue guidance, forecasting slower-than-industry growth. Infosys said FY18 revenue would grow at 5.5-6.5% in constant currency. The company had previously forecast growth of 6.5-8.5%. There will be lots of important earnings to keep the markets buzzing.

The US markets ended at record highs in last session following the modest pullback seen in the previous one, supported by some upbeat earnings. The Asian markets have made mostly a positive start taking cues from the US markets. Japan’s stocks opened higher while investors also awaited the unveiling of China's new leadership line-up following the conclusion of the country's 19th Party Congress.

Back home, Indian equity benchmarks ended the volatile day of trade with quarter a percent gain on Tuesday, with Sensex and Nifty recapturing their crucial 32,600 and 10,200 levels respectively, ahead of Infosys’ second quarter earnings to be released later in the day. Markets traded mostly in green throughout the session, as traders took encouragement with SBI’s report that the government is likely to achieve its fiscal deficit target of 3.2 percent this financial year as the budgeted disinvestment receipts are on track to realise Rs 72,500 crore. The report noted that the government will able to meet the disinvestment target of Rs 72,500 crore as Rs 60,000 crore has already been achieved and hence the fear of low disinvestment receipts is completely unwarranted. Some support also came with Union Minister of Minority Affairs Mukhtar Abbas Naqvi’s statement that the Goods and Services Tax (GST) will remain as a Good and Simple Tax in the coming days to come and will prove to be as a better medium for small traders and businessmen. Markets witnessed a sharp selloff in last leg of trade to enter into red terrain, but selling proved short-lived and markets soon regained their lost ground with traders taking support with a private report highlighting that post-demonetization and implementation of the GST, the current economic slowdown has bottomed out and the recovery of the economy would critically depend on the initiatives the government takes from now onwards. The report added that the slowdown has bottomed out, however, the stage and pace of recovery would critically depend on the initiatives that the government takes from now onwards to boost the growth momentum, especially the private sector investment. Investors took note that more respite could be on the way Small and Medium Enterprises (SMEs), with the GST council set to ease a string of procedures, including partial relief on penalties on late filing of GST returns. Finally, the BSE Sensex surged 100.62 points or 0.31% to 32,607.34, while the CNX Nifty was up by 22.85 points or 0.22% to 10207.70.

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