Tushar Pradhan, CIO, HSBC Global Asset Management-India, on Tuesday said that the market was taking note of the government's intent to spur the economy.
His comments came after the Reserve Bank of India (RBI) on Monday approved a transfer of Rs 1.76 lakh crores surplus to the government as dividend, the highest ever dividend doled out by the central bank in its history. Most analysts expect the funds will mainly be used to offset weak tax collections. Besides, finance minister Nirmala Sitharaman on Friday announced a slew of measures to boost the Indian economy.
“We have had a very bad month I would say in terms of the developments and the kind of sentiment that we have seen. I think there was a lot of questions raised in terms of the government’s ability to reach the fiscal target, there were pressures building up in the economy which told us that the government was going to struggle to raise the revenues as targeted in the budget. The current announcement seems to indicate that there is going to be a lot of confidence for those numbers to be achieved. So I think as a market, as a sentiment, there is a dramatic change in terms of how people view fiscal finances from hereon,” said Pradhan, in an interview with CNBC-TV18.
However, he said the economy does not change overnight and added that it will take time to understand "which parts of the economy will benefit".
In terms of market stability, Pradhan said, “We have to understand that the market will be stable only when the denominator becomes quite clear. Earnings growth has to remain pretty robust. So if earnings don’t come by — no matter what the sentiment is — then your market will become a little bit more unstable from here."