After knee-jerk reaction, here’s what stock market expects from finance minister Nirmala Sitharaman

After Sensex and Nifty’s knee-jerk reaction to the appointment of Nirmala Sitharaman contrary to expectation, stock market experts say that the focus areas would be tackle the ongoing NBFC liquidity crisis and provide a fillip to slowing consumer demand. Notably, the Sensex registered a sudden fall on Friday afternoon, plunging more than 700 points from near record high levels consequent to the announcement. “The markets have reacted negatively just because it expected Amit Shah to become one,” technical analyst Milan Vaishnav told Financial Express Online. According to the expert, Nirmala Sitharaman’s appointment has seen the finance portfolio being handed over to a person with a stable head on her shoulders.

However, we cannot expect equity markets to get something very good or very bad directly, as a finance minister’s job is not very person specific, explains Milan Vaishnav, Consulting Technical Analyst at Gemstone Equity Research & Advisory Services. “The profile is less person-centric and they usually tread the path while implementing broader fiscal policies in hand with the PMO and the central bank. There is nothing in specific that the markets has to hope for or fear about,” he added. 

Ajay Bodke of Prabhudas Lilladher noted that Nirmala Sitharaman is eminently qualified to steer India’s economy which is facing multiple headwinds of slowing consumption impulses, moribund private capex cycle and anemic exports. Sharing the key focus areas, Ajay Bodke, CEO PMS Prabhudas Lilladher, observed that unprecedented squeeze in liquidity due to crisis in NBFC sector, and a consequent spike in risk aversion has severely impacted aggregate demand.  Sectors such as real estate, automobiles, consumer goods etc need an immediate respite, he said.

“With limited fiscal maneuverability it remains to be seen how she can inject a strong dose of fiscal stimulus to revive animal spirits. She will need to focus on strong & sustainable resource generation by increasing tax to GDP ratio & push for aggressive divestments,” Bodke said. According to investment advisor Sandip Sabharwal, Nirmala Sitharaman is a relatively unknown entity despite holding a key portfolio in the last government. “Expectations as such will be low. From the markets perspective it’s neutral at this stage,” he tweeted.

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