Christopher Wood, global head of Equity Strategy at Jefferies, in his weekly note 'GREED & fear' said that although the recent measures announced by the Modi government to revive the economy and the stock market are a positive, he will wait to witness a pickup in the activity.
"While these measures are a positive, GREED & fear will continue to wait for evidence of a pickup in activity," said Wood in his note. He noted that foreign net selling has continued since the announcement of the package.
In August alone, foreign institutional investors (FIIs) sold Indian shares worth $2.19 billion, their biggest sell-off in 10 months since October 2018, as per provisional data. Despite the announcement of measures, FIIs remained net sellers, selling Indian shares worth $421.82 million in three days — from August 26 to August 29.
On August 23, Friday, finance minister Nirmala Sitharaman announced a number of measures to spur growth. Among the key highlights of her announcements was the withdrawal of the enhanced surcharge on gains by FPIs and domestic investors.
In July, since the enhanced surcharge was announced in her budget, the Indian equity markets bled as FPIs turned net sellers, withdrawing Rs 12,419 crore from the market.
Among other important announcements that Sitharaman made on Friday were the release of Rs 70,000 crore to recapitalise the public-sector banks, no angel tax on start-ups registered with DPIIT (Department of Industrial Policy and Promotion), and others.
Additionally, the Reserve Bank of India (RBI) on Monday approved a transfer of Rs 1.76 lakh crores surplus to the government as dividend, the highest ever dividend doled out by the central bank in its history.
Most analysts believe the funds will mainly be used to offset weak tax collections, but risks of a fiscal slippage remain.
In his note last week, Wood had said that the surprise move by the government to change the constitutional status of Jammu and Kashmir has added an additional negative for the markets as it is assuming the security situation will now remain significantly worse.
It will reduce the Indian 'overweight' by a further one percentage point and add to Indonesia 'overweight' where the investment case looks much more straightforward, most particularly on a relative basis, he had said.
First Published: IST