Post the announcement of the first tranche of stimulus, equity fund managers await for more announcements to see a meaningful impact on equities. They believe that these measures may give a slight sentiment boost to markets in the near-term but are unlikely to trigger a sustained rally.
CIO of one of the top fund houses said that there was lack of clarity in the recent announcements. For instance, there are many questions like which bank will give loans to these MSME and the process to be followed. Also, what if these loans turn into NPAs in less than 4 years? In that case, will the government pay for it or the banks have to declare them as NPAs?
S Krishna Kumar, CIO, Sundaram MF believes that overall the first tranche of announcements on MSMEs, NBFCs, HFCs and MFIs is a good start. However, market awaits more concrete details in the coming days.
Fund managers are of the view that recent announcements are likely to give a boost to the likes of power companies and non-bank lenders.
George Heber Joseph, CEO and CIO ITI MF said, “Banks and NBFCs which are reeling under liquidity crunch will see things ease a bit. These announcements will be very positive on equities from this perspective. A few power distribution companies, where liquidity infusion has been made will benefit. Distribution companies always have a cash crunch, so it will be a positive for them,” he added.
Fund managers also believe that this exercise of giving sovereign guarantee will increase the confidence in the banking and NBFC system and would help in wiping off bad loans.
Pankaj Tibrewal, Executive Vice President and Senior Fund Manager, Kotak MF said, “When the government steps in and gives guarantee, it is a comforting factor for banks and the NBFCs that the government is there to support lending. This is a significant move in our view, which will make sure that some confidence comes back into the industry and lending starts again, especially for the stressed MSMEs.”
