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Published on 23/05/2020 9:47:54 AM | Source: Kotak Mutual Fund

Views On Weekly Market View by Shibani Sircar Kurian, Kotak Mutual Fund

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Below is the Views On Weekly Market View by Shibani Sircar Kurian, Executive Vice President, Fund Manager & Head- Equity Research, Kotak Mutual Fund

“Indian equity markets remained volatile during the week ended May 22, 2020. During the week, the government outlined in detail the fiscal stimulus plan designed to support and revive the economy. The government has tried to balance fiscal considerations and the stimulus needed to revive economic growth. The emphasis of the announcements has been on SME segment and the rural economy with measures seeking to build self-reliance. The package also seeks to carry forward the structural reform agenda of the government with focus on land, labour, liquidity and laws. With these announcements, the attention now shifts towards the pace of execution which will likely determine how fast the economic gets back on its feet. With, further easing of restrictions under Lockdown 4.0 , some of the high frequency data indicators now point towards the resumption of economic activity and this is a positive development for the market. However, reaching normalised level of economic activity will likely take time with social distancing measures in place.

The fiscal measures were followed up with monetary policy announcements as well. The RBI continues its accommodative stance and sought to support the economy by lowering policy rates (repo rate) by 40bps to 4% as it advanced the MPC (Monetary policy Committee) meeting which was earlier scheduled to be held between June 3-5, 2020. Directionally , RBI expects inflation to taper off and move below its targeted inflation rate of 4% by 2HFY21. This could provide some more room for further rate cuts if so required to revive the economy. In order to support businesses and the retail borrower, RBI also announced the extension of moratorium on loan repayments for an additional 3 months till 31st August.

Globally markets too remained volatile as well even while there was some hope of a possible cure with positive preliminary results of a few drugs. Tightening of geopolitical tensions between US and China would also be a key to watch out for apart from the trajectory of spread of COVID -19.”

 

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