Investors cheer Modi's ₹20 trillion package; Sensex, Nifty end 2% higher
PM Modi had said the package, nearly 10% of India’s GDP, aims to put money in people’s hands to spur domestic consumptionThe package includes the previous ₹1.7 trillion stimulus announced in March and the RBI's liquidity boosting measures
Indian equity market on Wednesday closed over 2% higher as investors cheered the government's ₹20 trillion stimulus package to revive the economy, which has come to a grinding halt due to the lockdown imposed in the wake of the coronavirus pandemic.
The benchmark Sensex had gained as much as 1,474.36 points, or 4.7%, to 32845.48 intraday, while the Nifty 50 index climbed 387.95 points, or 4.2%, to 9,584.50
However, both Sensex and Nifty pared some intraday gains, ending 2% higher as investors awaited details of the package to be announced by finance minister Nirmala Sitharaman at 4pm today.
“The details of package are not yet available, key focus areas are likely to be MSME, infrastructure, taxation, easing of labour laws, etc." said Avneesh Sukhiija, senior analyst, financial services at BNP Paribas.
"We expect the Reserve Bank of India (RBI) to announce further measures to limit asset quality impact on banks. Extension of moratorium, one-time restructuring and credit guarantee schemes could be introduced in the next RBI policy scheduled during 3-5 June, 2020", Sukhiija added
Modi had also said the package, nearly 10% of India’s GDP, aims to put money in people’s hands to spur domestic consumption.
The package includes the previous ₹1.7 trillion stimulus announced in March and the RBI's liquidity boosting measures.
Investors are cautious as markets are weak globally due to fears of a second wave of virus infections and conflicting views on opening up of economies. The rise in the number of new cases remains a cause worry for India.
Meanwhile, the yield on the 10-year government bond erased gains and fell amid speculations that the RBI may buy bonds in the secondary market to keep borrowing costs in check.
The yield on the 10-year bond fell 8 basis points (bps) to 6.01% after rising by 12 bps due to concerns that the government may again raise borrowings. Rupee closed up 0.10% at 75.43 a dollar.
"Though the bond market would keenly await finer details of the package, a knee jerk sell off seems inevitable. The supply of bonds would be too huge for the markets to absorb and the RBI would have to monetise a significant portion of it. It also raises concerns over sovereign rating outlook/rating revision by credit rating agencies" said IFA Global, in a note to its investors.
(Bloomberg contributed this story.)
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