Indian shares tumbled on Thursday after a poorly received initial stimulus from the government to aid coronavirus-hit businesses, while a gloomy outlook from the head of the U.S. Federal Reserve further weakened sentiment.
India’s blue-chip NSE Nifty 50 index erased its 2 per cent gain from Wednesday, when markets cheered an announcement from Prime Minister Narendra Modi of a 20-trillion-rupee ($266 billion) economic stimulus.
But the initial details of the plan, which includes nearly $60 billion of loan guarantees for small businesses, shadow banks and power companies, failed to excite investors who were expecting more.
Economists said that although the measures outlined amounted to policy support of 5.9 trillion rupees, the fiscal impact on the government’s budget would be less than 250 billion rupees.
“People were carried away by the hype created by the PM,” said Deepak Jasani, head of retail research at HDFC Securities in Mumbai.
“The cash infusion to kick-start the economy is very limited. There are doubts as to whether this is going to help in any way, at least in the near term.”
Still, Finance Minister Nirmala Sitharaman is expected to unveil more steps on Thursday around 1600 local time (1030 GMT) and in the coming days, including possible land and labour reforms.
India has been under a weeks-long lockdown that has hit the livelihood of millions of workers, while leaving many businesses without revenues. Coronavirus infections have been rising steadily in the country and on Thursday surpassed 78,000, with more than 2,500 deaths.
The NSE Nifty 50 index ended 2.57 per cent lower at 9,142.75, while the S&P BSE Sensex closed down 2.77 per cent at 31,122.89.
World markets also fell after a sobering warning from the World Health Organization that the coronavirus may never go away and U.S. Fed Chairman Jerome Powell’s prediction of an “extended period” of weak economic growth.
In India, IT services stocks fell the most. The Nifty IT index shed 3.5 per cent, with Infosys Ltd falling 5.2 per cent.
Oil-to-telecoms conglomerate Reliance Industries Ltd was the biggest drag on the Nifty 50, with a 4 per cent decline.
HDFC Bank Ltd, with a 3.6 per cent slide, was the next biggest drag. The Nifty banking index fell 2.9 per cent.