Prime Minister, Narendra Modi said the package will focus on four factors – Liquidity, Land, Labour and Laws.
Prime minister Narendra Modi finally announced the much-awaited fiscal stimulus package on May 12. At Rs 20 lakh crore, it amounts to 10 percent of India’s GDP.
In fact, the headline number is much higher than estimated by economists, industry associations and brokerage houses.
“Reforms announced were satisfactory and standard in nature. They were necessary as India is still reeling under the lockdown, and the economy has come to a standstill,” Amar Ambani, Senior President and Head of Research – Institutional Equities, YES Securities told Moneycontrol.
“Overall, the announcement will provide much-needed relief to the market,” he said.
Essentially this package is to spur growth to build a very self-reliant India and that’s why this initiative is called ‘Atmnirbhar Bharat Abhiyaan. Prime Minister, Narendra Modi said the package will focus on four factors – Liquidity, Land, Labour and Laws.
“We believe these are much-needed measures. The bigger picture here is about creating enough liquidity, which will help in the revival of growth and job protection. I believe these measures will help in reviving the troubled SME/MSME segment, which is the foundation of an economy like India,” Aishvarya Dadheech, Fund Manager at Ambit Asset Management said.
The government has taken care of fiscal stress and credit rating as experts feel the first tranche is not going to affect the fiscal deficit of the country at least this year.
HDFC Securities said adding earlier COVID-19 related measures of both RBI and government, the package (liquidity+fiscal) to-date cumulates to around Rs 13 lakh crore (around 6.5 percent of GDP), with remaining Rs 7 lakh crore worth of stimulus to be announced over next few days.
In addition to monetary/fiscal measures, the government is pivoting around COVID crisis to announce some structural reforms and Ease-of-Doing business measures, which are ultimately aimed at raising India’s self-reliance quotient and making it a bigger contributory in global supply chains, the brokerage feels.
Hence with a lot of liquidity measures, including Rs 3 lakh crore collateral-free automatic loans for business (including MSME), Rs 30,000 crore liquidity facility for NBFC/HCs/MFIs, Rs 45,000 crore Partial Credit Guarantee Scheme 2.0 for NBFC, etc, announced by the government and RBI since the beginning of lockdown, lot of stocks are expected to be directly and indirectly benefitted.
Here is a list of stocks that are going benefit from these measures:
Brokerage: HDFC Securities
The broadening of MSME definition should also increase universe of likely beneficiaries. FM has also mandated release of MSMEs receivables from Government and CPSEs within 45 days, which should lower working capital needs. Axis Bank, AU Small Finance Bank, City Union Bank, DCB Bank, Federal Bank and Karur Vysya Bank are key beneficiaries.
RBI’s TLTRO, the Government is attempting to push more credit towards fund-starved NBFCs with a fully guaranteed special liquidity scheme for investment-grade debt paper of NBFC/HFC/MFI + a 20 percent partial credit guarantee scheme for investments in AA and below rated & unrated bonds/CPS. Key beneficiaires would be Shriram Transport, M&M Financial, Cholamandalam Investment and LIC Housing Finance.
Brokerage: Motilal Oswal
With announcement of the new measures, NBFCs that are most likely to be positively impacted are Shriram City Union Finance, Cholamandalam Investment and Repco Home Finance. We maintain preference toward large private banking franchises with robust liability mix and diversified asset base. Top ideas are ICICI Bank, HDFC Bank and SBI among banks and HDFC in NBFCs.
Brokerage: Emkay Global
The brokerage house continued to like NBFCs with a relatively diversified liability franchise and superior collection mechanism. The current liquidity measures would accelerate margins, however, the collection mechanism remains the key for now. Emkay remained confident in the collection ability of HDFC, Bajaj Finance and Cholamandalam Investment.
Brokerage: Axis Securities
While growth has been a dominant theme in this post COVID-19 market fall but with the major stimulus announcement and good chances of the opening of economy, discretionary including Autos is likely to perform well. Quality PSUs and Value themes are also likely to perform.
With the above-mentioned ideas as a backdrop, Axis’ short term buy recommendations are HDFC Bank, Bandhan Bank, Federal Bank, DCB Bank, Bajaj Finance, Cholamandalam Investment, SBI, ITC, Maruti Suzuki and L&T.
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