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Stock markets are expected to encourage the long-awaited stimulus package announced by Prime Minister Narendra Modi on Tuesday. However, earnings may be limited as investors will wait for finer details before raising the ante.
Following the announcement of a Rs 20 trillion package, Nifty contracts traded on the SGX soared 5 percent, while US deposit receipts (ADRs) from Indian companies increased by 3 to 10 percent . Experts said the number of headlines far exceeded estimates, but it remains to be seen how much real fiscal momentum would be and how much of that is monetary measures taken by the Reserve Bank of India (RBI).
“The 20 trillion rupees package is more than you thought. We have to wait and see what the details are. I do not believe that the entire amount can be financed by the prosecutor. I am sure that a large part will be guarantees and other types of concessions that are not pure money. But the intention will be a great reinforcement of feelings, “said Jyotivardhan Jaipuria, founder of Valentis Advisors.
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SGX Nifty peaked at 9,676 after the announcement. They abandoned some gains to trade in 9,598, 4.6 percent as of 10 p.m. India time. On the NSE, the Nifty had closed at 9,197, 0.5 percent less than Monday closed Tuesday. After rising 14 percent in April, benchmark indices are down nearly 7 percent so far this month. In recent weeks, Indian markets were seen to underperform some of their global peers. The government and the Reserve Bank of India (RBI) have announced stimulus measures in recent months.
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“The headline numbers are pretty impressive. But as they say, the devil is in the details. We can only arrive at a fair evaluation once the fine print has been published. I suppose much of this package could be in the form of guarantees. Stimulus plans announced by foreign governments put money in their hands, helped small businesses, and injected liquidity into financial markets. If the Prime Minister’s plan follows a similar approach, it will be a huge boost to the market, “said Andrew Holland, CEO of Avendus Capital Alternate Strategies.
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Finance Minister Nirmala Sitharaman is expected to announce the detailed plans in the coming days.
“The emphasis on the package is on self-sufficient India. My inference is that sectors such as medical devices, automobiles, accessories and defense equipment should benefit. The package could also consist of making subsidized land available. The Prime Minister also spoke about land and labor reforms and liquidity, ”said Saurabh Mukherjea, founder of Marcellus Investments.
Mukherjea said that if much of the benefits of the package were incentives, the fiscal ramifications would be modest. “There may be a sovereign downgrade risk for India, but the rest of the world faces the same risk. That is the least of our risks. “
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