Why Finance Minister's stimulus failed to impress stock market


Published On: Thursday, May 14, 2020 | By:

Why Finance Minister's stimulus failed to impress stock market

Equity market came under heavy selling pressure on today(14th May 2020) even after the Union Finance Minister Nirmala Sitharaman Wednesday announced a set of stimulus measures of nearly Rs 5.94 trillion to support micro, small, and medium enterprises (MSMEs), non-banking financial companies (NBFCs), and power distribution companies. The S&P BSE Sensex tanked as much as 703 points or over 2 percent during the day while NSE's Nifty slipped nearly 200 points. On the sectoral front, barring FMCG and pharma, all the indices on the NSE were trading in the negative territory.

The announcement by the Finance Minister, as per analysts, was more of leveraging on existing institutions and postponement of activities such as tax deducted at source (TDS) instead of fresh infusion of cash. That apart, some even suggest the announcements thus far have been short of expectations.

"Market was expecting a fresh infusion of liquidity which could have been in the form of external borrowings, using forex reserves or RBI balance sheet, among others. But, the government did not announce any such things. It has announced measures like postponement of TDS. Moreover, public sector units (PSUs) such as REC and PFC have to mobilise Rs 90,000 crore for the stressed power distributions companies. These things dented investor sentiment," explained experts.

 Weak global cues, Fed chair Jerome Powell's warning of prolonged economic weakness, subdued March quarter results, and companies' commentary and no concrete solution of the Covid-19 problem were the other major factors that dragged the market lower today. 

"There is a growing sense that the recovery may come more slowly than we would like. But it will come, and that may mean that it’s necessary for us to do more. The market is expected to hover at the current levels and will not fall drastically from here on. "Nifty is expected to move in the range of 8,500-9,500 levels for some time" experts opnied.

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