Effect of Economic Stimulus package on the Stock Market

Till Friday, Finance Minister Nirmala Sitharaman had announced three of the five promised tranches of her Government’s economic stimulus package. However, these had failed to stimulate things at Dalal Street and the Indian stock markets, for the most part, remained rather uninterested. With the final two tranches being announced this weekend, will these sentiments be any different on Monday?

I think it might have some positive reactions but nothing big will happen unless the lockdown is lifted! Here’s why:

Liberalization and Capitalism

The market loves when it has more playing fields, and the Finance Minister has given it just that! Most experts are still skeptical about the benefits of this Stimulus package but the way I look it, PSUs are being privatized, coal has been divested, air space is being opened up, private players can now be part of space exploration, and insolvency proceedings have been stopped (and their threshold raised)! Regardless of whether these have immediate or long-term benefits, they are more than enough reason for the market to open positively tomorrow.

Further, Indian public companies can now directly list their securities in foreign jurisdictions and positive steps have been taken in the defense, power, and mining sectors. The Ease of doing business will definitely go up and we can expect more foreign companies to take note of this!

However, with the coronavirus cases going up and uncertainty over the lockdown restriction being eased, it’s hard to measure anything with the standard market rules we are used to. The general mood surrounding the tranches from Dalal Street has been negative as well.

Either way, I am only expecting a strong bull run once the lockdown eases. So wait for that before selling anything!

Stocks I am watching on Monday

I will be closely monitoring the power, mineral, and aviation sectors on Monday. Among my stocks, I could finally hit some green on Spicejet, and BHEL is expected to continue its fine run. On the down side, with the lockdown extending, my stocks in the Textile, Retail, and Realty could further deteriorate.

Images: Monsieur Boukaih, Deniz Altinda, Micheile Henderson

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