As the economy goes through a slowdown, finance minister Nirmala Sitharaman announced a series of measures on Friday in a bid to stimulate growth. Brokerages believe the measures will likely improve investor sentiment and revive demand.
As the economy goes through a slowdown and with the markets showing no sign of arresting the continuing slide, finance minister Nirmala Sitharaman announced a series of measures on Friday in a bid to stimulate growth. The Union minister’s announcements came amid a clamour from the industry and other stakeholders to revive the sluggish state of affairs.
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Among the measures announced by Sitharaman included the withdrawal of enhanced surcharge on foreign portfolio investors (FPIs) and domestic investors, restoring the pre-Budget position, a walk-back on treating corporate social responsibility (CSR) violations as civil offence from criminal offence.
Further, the government has withdrawn angel tax provisions for startups. All pending goods and services tax (GST) refunds until now to be paid in 30 days and future GST refunds to be paid in 60 days.
Sitharaman announced that all income tax notices must be disposed off within three months. Issue of I-T notices, letters, orders, etc shall go through a centralized system.
The automobile has been among the worst affected industry due to the slowdown. In a bid to boost the continuously falling demand for vehicles, the government will lift a ban on the purchase of new vehicles to replace old ones in government departments and is likely to announce new scrappage policy soon.
Brokerages have lauded the government’s initiatives to boost growth.
Sanjeev Prasad, managing director and co-head at Kotak Institutional Equities, said that the announcements will improve the prevailing market sentiment. However, he emphasized upon the need for structural reforms.
“The government’s August 23 measures will help improve market sentiment and demand to some extent. However, the absence of any fiscal stimulus in the form of GST cuts may disappoint a section of the market,” Prasad said.
“Also, the sharp escalation in China-US trade issues will weigh on global investment sentiment and macro-economic conditions. The government would do well to follow up the recent measures with structural reforms to turn an increasingly adverse global situation into an opportunity,” he added.
Mahesh Nandurkar, India strategist at CLSA, said that the measures are likely to give the economy a short-term boost.
“Measures announced by the government and expectations for more over the next couple of weeks will likely improve investor sentiment and should drive at least a short-term bounce, as the government has given a clear signal that it acknowledges an economic slowdown and is willing to act promptly to address the issues. The economic outlook will depend on how big the measures to boost housing turn out to be,” said Nandurkar.
Ridham Desai, head of India equity research and India equity strategist at Morgan Stanley, said that measures announced on Friday will reverse the economy’s underperformance thus far.
“Given valuation and sentiment support and the first of three sets of actions from the government, we think India's relative underperformance year-to-date to EM may reverse in the weeks ahead. From a portfolio perspective, we like financials, consumer discretionary and industrials both large and mid-caps,” said Desai.
“The key risk is that our view on global equities is cautious and this should cap absolute upside from Indian stocks,” he added.
Abhiram Eleswarapu, head of India equity research at BNP Paribas, said that the government’s bid will boost the markets in the short-term and some of the ailing industries, including automobiles and housing finance companies will benefit from the newly announced measures.
“In particular, we see autos (commercial vehicles, passenger vehicles), PSU banks and housing finance companies, and infrastructure stocks reacting positively, and the moves as modestly negative for IT services near-term,” he added.
First Published: Aug 25, 2019 7:50 PM IST