We believe that the PM’s speech should be considered as market signalling before the actual measures are announced in the coming weeks if the conflict continue, says domestic brokerage JM Financial
Bengaluru-based real estate stocks and jewellery stocks continued to see selling pressure for second straight day on May 12 after Prime Minister Narendra Modi exhorted Indians to curb gold purchases for next one year and work from home to temper the fuel crisis amid West Asia conflict.
Bengaluru-based real estate stocks like Brigade Enterprises, Prestige Estates, Puravanakara fell up to 3% while jewellery stocks like Titan, Kalyan Jewellers, Senco Gold declined up to 5%.
"We believe that the PM’s speech should be considered as market signalling before the actual measures are announced in the coming weeks if the conflict continues. Such fiscal and monetary measures would cushion the currency (INR) from further depreciation," said JM Financial.
"We expect the government to follow a gradual approach; hence, fuel price may be increased in tranches, LRS limits may be reduced temporarily, and duty on gold imports may be hiked as the lean wedding season approaches," added the domestic brokerage.
"It is worth highlighting that oil accounts for 20% of India’s total imports, gold for 9% and fertilisers for a manageable 2%. Around 58% of total remittances ($30 bn in FY25) under the Liberalised Remittance Scheme (LRS) is for international travel while remittances for investments in equity is another category that has more than doubled to 8.4% versus 3.1% in FY19. Hence, the PM’s speech was targeted and should be considered as a precursor to actual austerity measures in a gradual manner if the conflict in West Asia lingers. A prolonged conflict could moderate GDP growth to 6–6.5%, and CAD could deteriorate to 1.9% of GDP as inward remittances will also be at risk. Among other measures, we believe the government should focus on increasing strategic petroleum reserves," JM Financial said.