Vikas Khemani said, “We still run a risk of increase in new infections when the economy opens up and we could see some sort of lockdown again locally and at city level.”

Prime minister Narendra Modi announced a stimulus package worth Rs 20 lakh crore on May 12. On May 13, the market opened higher but then pared some gains.
After the announcement of the first phase of the package worth Rs 6 lakh crore by Finance Minister Nirmala Sitharaman on May 13, the market fell sharply on May 14 and closed with losses of 2.6 percent.
On May 15 also, the BSE Sensex shed 300 points and the Nifty50 was trading below 9,100 levels at the time of publishing this copy.
Experts feel given the negative reaction, the market does not seem to like the fine print.
“Definitely there is always a possibility of further fall in the market. I am not denying. I think the current tone of the market, there is no doubt that we are in a weak economic situation, and currently what we need is a very swift sort of stimulus to the economy. And more importantly, than announcement is the execution part. Like I think what US has done, execution has done at the speed of light, first, they executed very well, going out, buying bonds in the market, their markets are already stabilised,” Vikas Khemani of Carnelian Cap Advisors told CNBC-TV18.
According to experts, the package announced by the government may be clearly increasing the burden on companies, vendors, etc by giving them loans rather than giving upfront liquidity which they actually need now.
Finance Minister on May 13 announced Rs 3 lakh crore collateral-free automatic loans for business (including MSMEs), Rs 20,000 crore subordinate debt for MSMEs and Rs 50,000 crore equity infusion through an MSME fund of funds. She also announced a Rs 30,000 crore liquidity facility for NBFC/housing finance companies (HFCs)/microfinance companies (MFIs) and Rs 45,000 crore Partial Credit Guarantee Scheme 2.0 for NBFCs.
“There is a wide disconnect, businessmen were looking for stimulus which is money to them in some form or shape of other whether payment of salaries or some other kind of money in their kitty. What have come in, infact, some kind of hybrid plan to give more and more credit to industries. If we look at all packages announced by the government is basically lead to more indebted nations, more indebted businesses, more indebted farmers, more indebted street vendors,” Ajay Srivastava, CEO of Dimensions Corporate Finance Services told CNBC-TV18.
“In a situation where demand is very low etc, it does not look good. For anyone to look at the situation where everybody who is under stress will carry on now more debts. So idea was to give them equity, substenance and reduce the losses and they can recoup the losses partly by as a fiscal deficit or fiscal stimulus,” he said.
“Here we are talking about you take more debts. If you are a serious businessman, debt means you pay more interest, your EMIs will start after 12 months etc. So there is wide disconnect in what business were expecting, banks were expecting, what transpired in terms of the package. Therefore the market response was logical,” he added.
In the second phase, Finance Minister announced Rs 5,000 crore special credit facility for street vendors, Rs 2 lakh crore of concessional credit boost to farmers, extension of housing subsidy scheme for middle-income families till March 2021 etc.
Hence experts feel the market is expected to remain weak and further fall can be possible in coming days as we still carrying a risk of new infections even though economy reopens.
“I think as a whole the market looking pretty weak because direct demand stimulus which was expected and money in the bank which was expected is not coming through. What is more coming through is more debt which leaves us in a worst situation than we were to start with. Because as it is you are struggling in a business, now would you want to add more debts to your business when the demand is uncertain,” Ajay Srivastava said.
Vikas Khemani also said, “We still run a risk of increase in new infections when the economy opens up and we could see some sort of lockdown again locally and at city level. I think these kind of risk would have lot more to impact on market and volatility. I think the market defintely looks quite weaker.”
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