Govt Stimulus Drives Market, Eyes GST Relief | CORPORATE ETHOS

Govt Stimulus Drives Market, Eyes GST Relief

By: | November 4, 2017

By Vinod V Nair


Week that was…

Market witnessed strong up-move led affirmative signs of recovery in domestic earnings and rally in Index heavy weights. Strong core industries data, US FED status-quo on interest rate and positive global cues supported this trend. The concerns of domestic premium valuation took a back seat, while the sectors/stocks which are likely to be key beneficiaries of government’s stimulus package witnessed strong buying interest and market tested a new high of 10453.

Market was enthused by September core industries data which grew by 5.2%, is showing signs of revival in industrial growth, easing of GST and pick-up in restocking in the economy. There was ample signs of reversal in corporate earnings growth with better than expected results from Index heavy weights which improved the market sentiments.Recapitalization has given a positive impetus to the cash crunch PSUBs. Further, govt’s reforms agenda like infrastructure and job creation will address the slow-down in the broad economy. Infra and PSU Banks continue to witnessed strong buying interest. Realty showed strong out performance and was up by 8% on expectation of availability of better credit, further cut in lending rates and better transparency due to RERA. In Pharma, there is a consensus that sector has reached a trough in their business cycle as reflected in their recent earnings estimates. Expectation of faster US FDA approvals and relative cheap valuations, strong upside momentum was building-up in the sector. On global front, BoE hiked interest rate by 0.25% to 0.5%, which was on expected lines given rising inflation. US FED maintained status-quo on interest rate, while rising optimism on economic development is adding more weights to a hike in the month of December which is largely factored in the domestic market. The announcement of Jerome Powell as new US FED chair was taken positive by global markets.

Week ahead…

FIIs have turned as net buyers since the Govt announcement on Bharatmala and Recapitalization is positive sign. The concerns of premium domestic valuations have faded and investors are looking towards visible long term growth opportunities in sector/stocks. However, in the near term, market will continue gauge on-going Q2 results.  However, any reasonable relief in tax rates of goods under 28% bracket in the upcoming GST council meet next week will support current positive momentum.


Mr Vinod V Nair is Head of Fundamental Research, Geojit Financial Services Ltd.