Slowdown post IL&FS crisis warrants further stimulus say Angel Broking in its pre-budget review
Kolkata, July 4 (IBNS): Angel Broking Ltd, one of the well-known independent full-service retail broking houses in India, expects that given the recent slowdown in the economy, 'the final budget would contain further stimulus measures to boost the economy'.
India's first full-time woman finance minister, Nirmala Sitharaman, will present her first budget on Friday.
In its Union Budget 2019-20 Preview, the broking house said with the Reserve Bank of India (RBI) finally realizing that inflation is subdued, they have cuts rates by 75 basis points (bps) so far in 2019.
However, transmission of policy rate cuts has been an issue and so far there has been negligible transmission given tight liquidity conditions, according to the Preview.
It also said that tight fiscal and monetary policy over the past few years coupled with major structural changes have taken a toll on growth which was further exacerbated post the IL&FS crisis and its fallout.
This is reflected in high frequency numbers like IIP and auto sales numbers as well as the GDP numbers, which slowed down to 5.8 per cent in Q4FY19 from 8.0 per cent in Q1FY19.
Sameet Chavan (Chief Analyst-Technical and Derivatives, Angel Broking), in his Daily Market Wrap Up on Thursday, said:
“All four sessions in the week had a gap up opening; however the margin has not been so great. During the day, we witnessed completely lacklustre moves as there was no participation seen ahead of the major event (Budget). Some small swings were seen in the final hour; but it was certainly not a notable movement. Hence, Nifty eventually ended tad below the 11950 mark by adding one fourth of a percent to the previous close.
It was very much unlike an (weekly) expiry day for our market and traders looked a bit conservative ahead of the event. Few budget related themes played out on some expectations but overall, not a major development in the market. As far as index is concerned, chart looks a bit tired, which is not at all an encouraging sign. However having said, it’s a sign of less participation and hence, all eyes would be on Finance Minister tomorrow. We hope to see favourable announcements which will boost trader’s sentiments going ahead. On the higher side, 12000 remains to be a sturdy wall and we still remain hopeful for it to be demolished quite soon. On the lower side, 11900 and 11814 would now be seen as key supports for the index.”
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