On Thursday, the Indian stock markets wiped all gains made on the previous day on PM Narendra Modi's announcement of a COVID-19 relief package worth Rs 20,000 crore.
BSE's Sensex fell over 3 percent to 31,052.65 during the day. All sectoral indices except FMCG and Pharma were in negative territory, losses lead by the IT stocks.
Details of the package dubbed "Aatma Nirbhar Bharat" were announced by Finance Minister Nirmala Sitharaman after market hours on Wednesday. Sitharaman said that the aim of the COVID-19 relief it to make India self-reliant but does not mean that the country will become an isolationist country. The intent is to build local brands and take them to the world, she explained.
The Rs 20 lakh crore package includes previously announced PM Garib Kalyan Package of Rs 1.7 lakh crore (announced in March).
Sitharaman is scheduled to speak to the press on Thursday again at 4 pm.
1. Announcements short of expectations
According to analysts, the announcements made were more of leveraging on existing institutions and postponement of activities such as tax deducted at source (TDS) instead of fresh infusion of cash. Some expected the fresh boost of liquidity in the form of external borrowings.
"Though yesterday's press conference by FM was just the first in a series, the outcome was below market expectations. This has led to risk aversion in the markets. Further, markets would be cautiously watchful of the announcements in the rest of the addresses to ascertain what is on offer by the government to kickstart the ailing economy and would cheer only if there is something to drive growth in the economy, propel consumption or investments," Pankaj Bobade, head of fundamental research at Axis Securities was quoted in Business Standard.
Moreover, those that believe that the move was positive said that the implementation of these measures announced would be vital to see results of improved credit flow.
From Thursday's announcements, the market expects the focus to move to agriculture, the main occupation in India.
2. 'COVID-19' may never go away says WHO
With the total number of global deaths edging closer to 3 lakh and cases in infections in India nearing 80,000, the World Health Organisation (WHO) warned that coronavirus "may never go away" and could become an epidemic like HIV. It cautioned against trying to predict how long coronavirus would keep circulating, and called for a "massive effort" to overcome it.
The statements came as Russia became the nation with the second highest number of infections at 242,271, only behind the US with nearly 1.4 million cases.
3. Weak global cues
After a stark warning from US Fed Reserve Chairman Jerome Powell, American markets declined on Wednesday.
"While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks," he said.
With no concrete solution of the COVID-19 problem in sight, Powell warned of an "extended period" of weak growth and stagnant incomes, pledged to use more of the central bank's power as needed. However, he downplayed the possibility of negative interest rates.
4. Lockdown 4.0
PM Narendra Modi in his address to the nation on 12 May talked about lockdown 4.0, which he said would have new rules and relaxations. Without revealing the details, he said that announcements would be made on 18 May based on the suggestions from chief ministers.
With no clarity on the rules as the number of infections and deaths from COVID-19 surging in the country, markets reacted to the uncertainty on complete re-opening of the economy.
The Indian Railways announced that it would suspend all regular bookings, except special trains, till 30 June, indicating possible extension in restrictions on movement in the country.