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The equity market was under strong selling pressure on Thursday even after Union Finance Minister Nirmala Sitharaman announced on Wednesday a stimulus package of nearly Rs 5.94 trillion to support micro, small and medium-sized enterprises (MSMEs), non-bank financial companies (NBFC) and energy distribution companies.
The S&P BSE Sensex fell as much as 956 points or 3 percent during the day, while NSE’s Nifty fell 264 points or 2.8 percent. At the close, the S&P BSE Sensex was 31,123, down 886 points or 2.8 percent, while Nifty finished at 9,143, down 241 points or 2.57 percent. On the sector front, except FMCG and pharma, all the indices in the NSE ended in negative territory.
So what triggered the market sell-off today?
Wednesday’s announcement by the Finance Minister, according to analysts, was more of a leverage on existing institutions and the postponement of activities such as the tax deducted at source (TDS) rather than a new infusion of cash. Other than that, some even suggest that the ads so far have been below expectations.
“The market expected a new infusion of liquidity that could have been in the form of external loans, using currency reserves or RBI balance, among others. But, the government did not announce such things. It has announced measures such as the postponement of TDS. public sector units (PSUs) such as REC and PFC have to mobilize Rs. 90 billion rupees for stressed power distribution companies. This affects investor sentiment, “explains G Chokkalingam, founder and managing director of Equinomics Research.
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Pankaj Bobade, chief research officer at Axis Securities, on the other hand, suggests that the ads did not meet market expectations.
“Although yesterday’s FM press conference was only the first in a series, the result was below market expectations. This has led to risk aversion in the markets. Furthermore, markets would be on the lookout for announcements. in the rest of the directions to determine what the government offers to boost the economy in crisis and would encourage only if there is something that drives the growth of the economy, drives consumption or investment. I think markets are eagerly awaiting such measures, ” Bobade said.
Weak global signals
Weak global signals, Fed Chairman Jerome Powell’s warning of prolonged economic weakness, moderate March quarter results, and company comment and no concrete solution to the Covid-19 problem were the other major factors dragging down to the downside market on Thursday.
Federal Reserve Chairman Jerome Powell warned on Wednesday of an “extended period” of weak growth and stagnant income, vowing to use more of the central bank’s power as needed and issued a call for additional fiscal spending.
“It will take some time to get back to where we were,” Powell said in an Internet broadcast. “I think there is a growing feeling that the recovery may come more slowly than we would like. But it will come, and that may mean that we need to do more,” Powell quoted Reuters as saying. In reaction to this, US stocks ended sharply lower on Wednesday and other global stocks, too, traded weak on Thursday. CLICK TO READ
Commenting on the market outlook, Sudip Bandyopadhyay, president of Inditrade Capital, says that the market is expected to remain at current levels and not fall dramatically from now on. “Nifty is expected to move in the 8,500-9,500 level range for some time,” says Bandyopadhyay.
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