Bear market over? Should you buy now?
Ever since the budget has been announced by the Finance Minister Nirmala Sitharaman on 5th of July, the Nifty has been heading south. On 4th of July Nifty closed at 11,947 with the dreams that the new budget will push through the 12,000 barrier. However, the budget brought in a lot of changes which did not go well with many investors. On 22nd August Nifty had fallen to 10,741 as uncertainty and the negative environment continued.
On Friday, 23rd August the market improved to 10,829 on the hope of announcements incoming from the Finance Ministry. There were approximately 504 stocks which had fallen to 52 week low on Friday. There were a lot of decisions which Finance Minister Nirmala Sitharaman had announced in the budget which had triggered this downfall. Some of these decisions were reversed yesterday, which will be a welcome change and can now trigger a bull market.
Here are a few of the changes which will have a significant impact in the coming months
In the budget, Finance Minister Nirmala Sitharaman had announced additional surcharge for higher-taxed income groups. These income group contained around 40 percent of Foreign Portfolio Investor (FPI). This move backfired completely and led to FPI withdrawing approximately Rs. 23,000 crores for the market. Yesterday, the Finance Minister has announced a reversal of this decision.
Rs. 70,000 crore will be given upfront to the Public Sector Banks (PSBs). This is a huge move by the Finance Ministry and will enable these lenders to expand credit.
The Ministry of Micro, Small and Medium Enterprises (MSME) will release all pending GST refunds within the next 30 days and any future refund will be settled within 60 days.
Housing Finance Companies (HFC) will see further assistance and now liquidity support has been increased to Rs. 30,000 crores.
The Finance Minister Nirmala Sitharaman has said that there will be no harassment from Tax departments and they are working towards making things more systematic. Any issue of I-T orders, notices or summons will be done through a centralized system.
Startups get a big boost as Angel Tax is withdrawn by the government.
More than 1400 corporate offenses have been withdrawn by the government.
One of the sectors needing any sort of positive news was the Auto Sector. Any BS-IV vehicle purchased till 31st March 2020 will be operational till the registration period.
One of the most negative news for the Auto sector in the budget was the revision of the one-time registration fee. This has now been pushed ahead to June 2020.
Another big change was the government’s decision to not buy any new vehicles for their employees. This ban has now been lifted, which should automatically see new cars being bought by the government.
Depreciation of any vehicle bought between now till March 2020 will be now 30 percent.
There were a lot more of such announcements but I have highlighted the main ones. The Finance Minister Nirmala Sitharaman has also said there will be one more announcement next week. These booster packages from the Finance Minister can get the bull market rolling.
There was a meeting held between the representatives of various sectors and Nirmala Sitharaman last week. The representatives were pleasantly surprised that their concerns were heard and new regulations were shared within one week. This should give the much-needed confidence to the Indian economy.
Next week is the perfect opportunity to buy but as usual, be cautious with your approach as the trade war between the US and China may have some negative impact. I will be very surprised if the bulls don't have a great week. As mentioned at the start, 504 stocks are on 52 week low. So there is hardly any risk if you decide to invest right now.