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Nifty Today – Nifty May Hit Life Time High

The Nifty50 closed 44 points away from its respective record high of 10,251.85 while Sensex ended 92 points shy of its respective record high of 32,699.86.

The S&P BSE Sensex and Nifty50, which closed within kissing distance of their respective record highs, should be able to create history when markets open for trading on Wednesday after the government announced huge recapitalisation plan for public sector banks.

The S&P BSE Smallcap and the Midcap index hit a fresh record high on Tuesday but benchmark indices closed just shy of a record feat.

The Nifty50 closed 44 points away from its respective record high of 10,251.85 while Sensex ended 92 points shy of its respective record high of 32,699.86.

Infosys, which declared earnings today, might have been a let-down but analysts expect action in the banking space which should boost the benchmark indices to record highs, suggest experts.

The government announced a Rs 2.11 lakh crore recapitalisation over two years in its bid to shore up finances of public sector banks, boost private investment and revive the economy.

At a press conference held by Finance Minister Arun Jaitley, Banking Secretary Rajiv Kumar said the government will infuse Rs 1.35 lakh crore through recapitalisation bonds and Rs 76,000 crore through budgetary support and market raising.

“The markets will most likely to react extremely positively post the headline PSU recapitalisation number. It acts as a sentiment booster for the markets which appeared to be fatigued,” Jimeet Modi, CEO at Samco Securities told Moneycontrol. “There could be fresh highs.”

Modi added that it will important to note how the recapitalisation effect trickles down to boost credit disbursements by PSU banks, whose shares only recently recovered from multi-year lows.

Reiterating the strength of fundamentals of Indian economy, the FM today said that GDP growth has bottomed out and should now head higher. The recapitalisation of PSU banks will play a crucial role in boosting the growth rate of Asia’s third-largest economy even as Jaitley said it could do so while not disturbing the fiscal deficit target.

Commenting on the fiscal deficit, Economic affairs secretary SC Garg said that fiscal deficit is under control and that the government is unlikely to overshoot its target of 3.2 percent fiscal deficit at the end of the current fiscal year.

Between 2014-15 and 2017-18, banks have made provisions of over Rs 3 lakh crore, more than 10 times the amount made in the preceding 10 years.

Finance Minister Arun Jaitley said that it is essential to increase public spending on infrastructure, and that expenditure on infrastructure is taking place at an unprecedented level at the moment.

“It is a very big step taken by the government. The market was factoring in a stimulus of Rs 1 lakh crore but this is more than double. PSU banks are not doing the collection work and are not lending but with recapitalisation, they will start participating [in economic activity],” AK Prabhakar, Head of Research, IDBI Capital told Moneycontrol News.

“The government will try and place it in such a way that it will not hurt the fiscal deficit. Hence, some provision will be made in the budget. But, there will be some slippages. Equity markets will take the development positively and our target for Nifty is at 11000 by Dec 2017,” he said.

India’s public sector banks have been saddled with a massive problem of bad debt, with overall gross non-performing assets rising from 37 percent in March 2014 to 82 percent by June 2017.

The move comes following a 2015 announcement in which the government had sanctioned a Rs 70,000-crore capital infusion under the Indradhanush banking reform scheme.

“Govt’s Rs 14 lakh crore capex plan over the next 5 years in key infrastructure sectors like roads, power, railways, digital and housing will have a significant multiplier impact on aggregate demand and employment,” Ajay Bodke, CEO & Chief Portfolio Manager PMS, at Prabhudas Lilladher told Moneycontrol.

“The proposed injection of Rs 2.11 lakh cr as recap bonds in capital-starved PSBs will act as a force multiplier for their growth needs. It will help in accelerating their tepid credit growth which was constrained due to lack of adequate capital and arrest loss of market share to well-capitalised private sector banks & NBFCs,” he said.

He further added that the markets would certainly give a thumbs up to this bold initiative and this would kick-start a virtuous cycle, leading to rise in PSB share prices. This, in turn, would make it easier for them to raise equity capital from the market.

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