BENGALURU (Reuters) - Indian shares slid on Thursday as an initial government stimulus to boost a coronavirus-hit economy failed to excite investors, while a dour outlook from the chief of the U.S. Federal Reserve added to weak sentiment.
Banking and IT stocks fell the most as markets parsed India’s announcement of nearly $60 billion of loan guarantees for small businesses, shadow banks and power companies.
The measures announced on Wednesday and part of a wider 20-trillion-rupee ($266 billion) fiscal and monetary package could help boost growth over the long term, but an immediate impact may not be felt, analysts said.
“The expectations were very high. It is a good scheme, but it will not have an immediate boost to the economy,” said A.K. Prabhakar, head of research at IDBI Capital in Mumbai.
“People thought a cash dole-out would have been better,” he said, adding that more direct cash transfers to the poor could have helped stimulate demand and support a revival in growth.
Some economists also said that although the measures outlined amounted to policy support of 5.9 trillion rupees, the fiscal impact on the government’s budget would only be less than 250 billion rupees.
Still, the measures are only a portion of the government’s planned stimulus package and Finance Minister Nirmala Sitharaman is expected to unveil more steps on Thursday 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 starved of revenues. Coronavirus infections have been rising steadily in the country and on Thursday surpassed 78,000, with more than 2,500 deaths.
The Nifty banking index was down 2.5%, with HDFC Bank (HDBK.NS) the biggest drag on the Nifty 50. State-run lenders fared slightly better, with the Nifty PSU bank index .NIFTYPSU that tracks them falling 1.5%.
The Nifty IT index .NIFTYIT that tracks information technology firms fell 2.5%. Infosys Ltd (INFY.NS) was down 3.8%.
Other Asian stock markets also fell as worries about a second wave of coronavirus infections and U.S. Federal Reserve Chairman Jerome Powell’s sober outlook dashed hopes for a quick recovery.
Powell warned of an “extended period” of weak economic growth, while vowing to use the U.S. central bank’s power as needed and calling for additional fiscal spending to stem the fallout from the pandemic.
Reporting by Sachin Ravikumar; Editing by Anil D'Silva