Nifty Can Test 7,500 If No Government Aid Comes In A Big Manner: Ajay Srivastava

While India’s equities managed to recoup some losses after their biggest slide in more than a decade amid the coronavirus pandemic, Dimensions Corporate Finance Services Pvt. Ltd.’s Ajay Srivastava listed three reasons that may have favoured investors’ sentiment in the last few days.

1. The markets are tracking the U.S. equities
2. Opportunistic buying
3. Hopes of an economic package from the government to bail out industries

But “if the government package doesn’t come through in big manner, you can see the lows of 7,500 levels very soon in the markets”, Srivastava, managing director at the corporate and financial consulting company, said in an interview with BloombergQuint.

The Covid-19 outbreak has forced India into the world’s biggest lockdown to contain the spread of infection, stalling all but essential economic activity. The benchmark indices tumbled, tracking the worst global selloff since the 2008 global financial crisis, before recovering some losses after the Reserve Bank of India and the government offered stimulus. On Monday, the Sensex and the Nifty 50 Index opened more than a percent higher in opening trade. Contracts on the S&P 500 slipped after U.S. stocks posted the first back-to-back weekly gain since early February.

Key highlights from the conversation:

Banking Space

• Banks are pretty secure as they have a 90 days window to recognise defaults.
• No provision will come to place till June quarter.
• The thesis is that banks have been bailed out by RBI and government always.
• Banks are a great bet but time has come to move the needle to small businesses.

Also Read: RBI Offers Bad Loan Relief To Banks But With Caveats

Corporate Ratings

• The threat of rating is always there. But that’s build in into the market.
• India is not going to be the only one hurt by the rating as fiscal deficit will go up and rating agencies will have to lower the ratings globally.

Also Read: Scope For More Fiscal And Monetary Support In India: IMF’s Gita Gopinath

Investing In Cards Business

• There is a temporary hiccup but from a long-term view. But with 36 percent income and 4 percent cost of funds, it’s a wonderful business to be in.
• In the present scenario, reliance on debt by the Indian retail market is going to be huge and will continue for a couple of years.

Household Liquidity

• Unless there is an equivalent salary protection package, you are looking at a big cliff and a big fall in consumption.
• Markets are oblivious to what will happen in the month of May when salaries might not come in.

Also Read: Coronavirus Impact: How To Deal With A Pay Cut

Economic Package

• If a big package comes in for MSMEs than the direct injection for large caps, and there is a consumption package, it will be a great positive.

Watch the full interview here: