FM’s package leaves market wanting more; short covering saves the day

NEW DELHI: Finance Minister Nirmala Sitharaman’s much-awaited stimulus package turned out to be a relief package for country’s poor – the bottom of the pyramid— in the wake of lockdowns and had nothing for industry as such.

But later the Finance Minister said she would soon come back with something more.

The focus of Thursday package was to ensure “nobody goes hungry,” which analysts said was indeed the need of hour and of foremost importance.

But the market had anticipated a bit more, especially for India Inc. The Rs 1.7 lakh crore package did not have any stimulus for the hardest-hit sectors such as aviation, hospitality and banking, among others.

While the stock market did hold intraday gains after the announcements, analysts said the gains were largely due to short coverings on March F&O expiry. They hope the government would soon announce sops for industries before it’s too late.

Other than cash transfers, Nomura had expected sector-specific rescue measures. It expected the government to announce tax breaks, relaxation of credit norms, liquidity measures for micro, small and medium-sized enterprises (MSMEs), in addition to bolstering of public health facilities.

“The government should come out with much more for industry, so that it does not suffer. It needs to work faster as India’s response has been slower than other countries. These are not times to worry about fiscal deficit, public debt or inflation. Thursday’s were good moves, but not sufficient,” said Mythili Bhusnurmath, Consulting Editor at ETNow.

The BSE Sensex ended Thursday’s session 1,410 points, or 4.94 per cent, higher at 29,946. Nifty50 added 323 points, or 3.89 per cent, to 8,641.

A host of stocks, which were trading higher ahead of FM’s speech, cut gains. BSE Bankex, which was up 9.5 per cent earlier in the day, in fact cut gains to end 6.7 per cent higher.

On possible relief measures for the travel and aviation sectors that are bearing the brunt of the lockdown, the Finance Minister said, "We will come back when something is ready."

Aviation stocks ended mixed with InterGlobe Aviation ending flat after gaining 4 per cent intraday. SpiceJet managed to hold on to its 5 per cent gains. Most hotel stocks ended higher.

"There was no announcement on stimulating the economy. Perhaps we may get some later,” said Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“Regarding relief to MSMEs, the FM said she would look into it. Industry-specific measures are likely to be announced in the next package. The government is prioritizing, it seems. This can go a long way in implementing the lockdown,” he said.

For farmers, who get Rs 6,000 annually via DBT, the government will frontload Rs 2,000 in the first week of April, which will benefit 8.69 crore farmers, the FM said on Thursday.

Under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), minimum wages will be increased to Rs 202 per day from Rs 182, she said. The move is going to add Rs 2,000 per month salary to 5 crore families.

Under Pradhan Mantri Garib Kalyan Ann Yojna, the FM announced 5 kg of rice/wheat for next three months. This is in addition to 5 kg rice/wheat the government is giving at present. In addition, FM announced Rs 1 kg of pulses for the next three months via public distribution system.

Jaspal Bindra, Executive Chairman, Centrum Group, said he was awaiting relief measures for corporate India, small entrepreneurs and startups.

“The move to lock down is well-acclaimed. The measures announced were timely and appropriate. We anticipate the rest of the economic packages soon and hope that they are designed to overcome the disruptions in the rest of society," Bindra said.

Sameer Kalra of Target Investing said the government might address India Inc concerns in a staggered manner.

He expects some sops for airlines and hotels soon. Kalra said RBI should not wait for April policy review to announce sops for banking sectors, which stares at delays in loan repayments as the year ends on March 31, 2020.

“Over and above the current package, special regulatory dispensation for NPA recognition or loan restructuring may need to be considered to address the challenges in the financial sector arising from the likely spurt in delinquencies from all asset classes in the short term,” said Suman Chowdhury of Acuité Ratings & Research.

Amit Bhagat, CEO & MD, ASK Property Investment Advisors, said industry would need interest moratorium and change in NPA classification norms before the end of the financial year.

“After the lockdown, the real estate industry needs liquidity with classification of developer loans as priority sector lending, lower risk weight for developer financing and individual housing loans, higher loan to value ratios, additional tax incentives for mid-segment home buyers for dwelling units up to Rs 75 lakhs, provision to allow set off of negative interest income for buying second dwelling unit,” he said.

Such measures can collectively bring the residential sector back as the largest employment generator, and will have a positive impact on demand of more than 100 industries.