The government finally took note of the economic slowdown that has not only hit earnings, but also dragged the market to multi-month lows since June.
Nifty itself corrected more than 1,400 points from record high touched in early June.
However, that downside was controlled and the market has turned rangebound for around a month now, thanks to the government starting to take measures to boost the economy and improve the sentiment.
After helping the auto sector, NBFCs and merger of PSU banks with upfront recapitalisation amount, Finance Minister Nirmala Sitharaman held another press conference on September 14, giving a boost to exports and relief to home buyers.
FM Sitharaman announced second set of economic measures to help revive the real estate via incentives to home buyers, relaxation of ECB guidelines and last mile funding of Rs 10,000 crore to those projects which completed 60 percent, export sectors via increase in credit guarantee for export finance, easing regulations, mega shopping festivals like Dubai and refund.
Experts feel these announcements will not only support housing and textile sectors, but also boost several other segments including cement, infrastructure, metals and housing finance companies.
“We expect well run real estate companies catering to affordable housing, textiles and banks to benefit out of the new schemes announced by the Government,” Vineeta Sharma, Head of Research at Narnolia Financial Advisors told Moneycontrol.
But for the market to benefit holistically, earnings need to show up which is a product of demand pull and easy-cheap funding, she said.
Rajiv Singh, CEO of Karvy Stock Broking said he expects shares of housing finance companies, real estate companies, metals, capital goods and exporters to do well.
The latest measures announced by the finance minister for stimulating the economy, send a clear message that the government is giving priority to revive economic growth.
Hence, apart from these sectors they are also expected to boost job creation, experts feel.
“The measures announced relating to housing and export promotion like textiles will provide a big boost to employment too since these are labour intensive industries,” VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said.
The Rs 10,000 crore fund for providing last mile funding for stalled non-NPA, non-NCLT projects needs to be specially appreciated, he added.
Here are the sectors that are likely to benefit from the second round of measures, according to experts:
Sameer Kalra, Founder & President (Research) at Target Investing
The current fall in housing loan demand and exports release in recent data shows there is requirement of much proactive measures.
The measures announced will benefit in medium and long-term trajectory of growth.
Since the first measures were announced, we have seen automotive industry doing higher production cuts, EXIM data weakening further and recent IIP only rising by a larger contribution of mining which is a seasonal impact.
The markets might find some announcements positive resulting in Nifty opening with gap up especially relating to special window for affordable and middle income housing projects providing a gap up on real estate, cement and other related sectors.
Vineeta Sharma, Head of Research at Narnolia Financial Advisors
India requires around 30 lakh homes each year. In the top eight cities, over eight lakh under construction homes are lying in the inventory of which at least 35 percent should be under Rs 45 lakh category.
NBFC crisis has only added to the woes of the real estate sector along with home buyers who have not been able to take delivery of homes due to delay in construction.
Amidst this concern, government announcement of setting up fund for non-NPA, non-NCLT category projects will act as a breather.
India dreams of being a top country in terms of the ‘ease of doing business’. The government aims at promoting higher exports through raising of Interest Equalisation Scheme to 5 percent, Remission Of Duties for Export Products, offering higher insurance cover to banks lending working capital for exports, plans for reducing the turnaround time of exports will all help increase our forex reserves.
At this juncture of slowing growth, increasing exports can bring a big relief to the government and our reserves.
We expect well run real estate companies catering to affordable housing, textiles and banks to benefit out of the new schemes announced by the government.
For the market to benefit holistically, earnings need to show up which is a product of demand pull and easy-cheap funding.
Rajiv Singh, CEO, Karvy Stock Broking
Government has turned its attention to stressed sectors, announcing measures for real estate, MSME, especially export oriented units.
The 10,000 crore fund for last mile funding is a good start to complete unfinished projects.
However, it excludes NPA/ NCLT cases which also need attention. We expect more measures once the government meets bankers. Relaxation of ECB guidelines should help fund flow to the sector. While a good start, more measures may be needed in the future.
Broadly, the focus is on MSMEs and exports. Steps like increase in credit guarantee for export finance as well as release of Rs 36,000-68,000 crore for export finance and monitoring export finance availability on a weekly basis should help smoothen credit flow.
The government has also promised to remove bottleneck. Among the populist measure, announcing mega shopping festival across the country like Dubai will give greater push for people to make contacts and connections across globe.
I expect shares of housing finance companies, real estate companies, metals, capital goods and exporters to do well.
Sanjeev Jain, VP Equity Research, Sunness Capital India
Finance Minister’s announcement about last mile funding to those projects which completed 60 percent may act as a booster for completion. Those projects which are stuck due to funding problem will take some breath by this move.
Government’s focus is more towards funding related issues front for the sector. The finance minister has said that quality of import is a major concern, which somewhere indicates that going forward ban or high import duty of some dull imported goods likely. Textile, housing, infrastructure stocks will be in focus on September 16.
S Ranganathan, Head of Research at LKP Securities
Measures to boost housing is a positive for mortgage companies in our view. Special Window to provide the much needed last mile funding for housing projects which are non-NPA and non-NCLT would also enable completion of unfinished homes.
Moreover, relaxation of ECB guidelines for affordable housing including interest rates on house building advance is a good step. Exporters in labour intensive sectors should be happy with the new RODTEP scheme from 01-01-2020 as it proposes to more than adequately incentivise exporters. Speedy ITC refunds and higher insurance cover for exporters should help in our view.