10 major events that shook & moved Indian equity market in Samvat 2075
Samvat 2075 was full of drama as it saw the general election, a tussle between RBI and govt, slowing economic growth, several debt defaults, a crippling liquidity crunch and a massive corporate tax cut.
General elections in May were perhaps the biggest event of Samvat 2075. The Narendra Modi-led Bharatiya Janata Party (BJP) won the election, clearing the path for him to become the Prime Minister for a second time. On May 20, the first market session after the exit polls, Sensex jumped 3.75 per cent, or 1,422 points, amid signals of a clear majority for Modi. However, on the result day, i.e. May 23, when the win was confirmed, Indian equity market saw profit booking and Sensex shed 0.76 per cent.
Corporate tax rate cut
Certainly among the most important events of the Samvat, on September 20, Finance Minister Nirmala Sitharaman announced to reduce corporate tax rates to an effective 25.17 per cent propelling the stock markets. Sensex and Nifty about 3000 and 1000 points within two sessions. The step would cost the government Rs 1.45 lakh crore in revenues.
RBI windfall to govt
After a long tussle and a resignation of a RBI governor over the issue, the Reserve Bank of India accepted the recommendations of Bimal Jalan committee and agreed to transfer Rs 1.76 lakh crore for 2018-19 from its reserves.
Both parties were fighting over the level of reserves that RBI was supposed to keep for contingencies.
Crisis in NBFC
A debt default by IL&FS last year triggered an avalanche that crippled the entire NBFC space, triggering a liquidity crunch that caused much distress among a number of players. Many companies defaulted on their debt obligations, the biggest being DHFL and Altico. The DHFL stock constantly hit lower circuit limits and traded at RS 21.30 on Thursday against its last September price of Rs 670.
In her first Union Budget after becoming Finance Minister, Sitharaman announced a number of sops and steps, among which was a proposal to increase income-tax surcharge on high net-worth individuals (HNIs) as well as capital gains of foreign institutional investors (FIIs). This irked FIIs, and they went on a selling spree withdrawing over Rs 20,000 crore from equity markets until the government rolled back those policies late August.
GDP growth hits 6-year low
India’s GDP growth rate for June quarter surprised everyone as it slipped to 5 per cent, the lowest in six years. All spheres of the economy experienced a slowdown. Domestic consumption, the bedrock of growth in the past few years, collapsed to an 18-quart low of 3.1 per cent from 10.6 per cent in the March quarter, pointing to fragile sentiment. Thanks to the lower demand, manufacturing activities also perished. In fact, core factory output in August contracted, a first in four years.
Repo rate cuts
The Reserve Bank of India cut repo rates by a total of 135 basis points in Samvat 2017, trying to boost economic growth and increase liquidity. The policy rates hit a decadal low of 5.15 per cent as of October. The monetary authority has decided to continue with an “accommodative stance as long as it is necessary” to revive growth.
Rs 100 lakh cr infra push
Soon after assuming office for the second term, the Modi government announced a Rs 100 lakh crore capex plan for infra projects in next five years. The plan, if realised, will boost manufacturing and construction sectors and in turn provide support to the struggling economy. The government has already formed a panel to identify projects that can be taken under this plan.
YES Bank saga
The saga of YES Bank was the most captivating one. First, Rana Kapoor was denied another stint as CEO by RBI. After that, the bank was found to be linked to almost every other financial institution that failed during the Samvat year. Its exposure to bad loans, especially in the real estate sector, turn bad and the stock took a massive hit. Even promoter Kapoor sold off a big chunk of his shares to clear off debt. From a high of Rs 404 last August, the stock crashed to hit a low of Rs 29.05, making the bank a smallcap in October.