Let’s first look in to what put Indian banking system in the troubled state which has bought many a financial companies under pressure. It began with reckless lending by banks in times of UPA-I and UPA-2 when Manmohan Singh wanted to reduce the negative effect on Indian corporates after the 2008 meltdown. The second, was that Raghuram Rajan kept refusing to bring down interest rates even when the inflation had begun to moderate. The capacities created with help of flooding loans, part of which were diverted by the masters of borrowing companies, came under pressure due to demand slump and check on inflation. It was a crime to not reduce the interest rates.
In Modi 1.0 period also the RBI did not do enough in terms of rate reduction and it was only under Modi 2.0 that the rates were brought down in series of such measures and the monetary expansion also happening after the lockdown was announced. I think a further dose of rate reduction is still needed more than the need to print the money under Covid related pressure. I don’t mean it’s not needed or is not a near necessity, however it should be done as minimally as possible to let the govt have some financial freedom to deal with crisis.
Now coming to market, I must say that both rate reduction as well expending money supply would be giving a philip to companies’ businesses and to markets eventually when the gradual opening is fully done which might be possible by the end of July. By then II quarter will have commenced and the analysts at that stage would have a clear idea as to which sectors withstood well enough and which sectors had their basics shaken. Second, they will have to look in to future of different sectors in light of new possibilities. I think that the financial sector, basic industries, telecom and auto sector will have promise left in terms of comparative valueations. These sectors may be entered even now for the related companies are selling pretty cheap.
I hope that market will open on a promising note today. SGX Nifty is trading at above 9200.