Rohit Shrivastava, fund manager at Sharekhan, is of the view that the government will have to step in and boost spending in order to spur demand.
Talking about the Nifty levels, he said, “The upside that I was keeping for a while, which I don’t think will be reached based on today’s market action was 12180 and so that is a risk to the upside. On the downside, today’s break signals that we might be heading towards 11,400-11300 levels and Bank Nifty could be around 29,300 – these will be the first most important support levels on the way down and if that breaks then its mayhem from there.”
When asked if more aggressive rate cuts would help stimulate demand, he said, “In an environment where debt levels are high and you start unwinding, everyone gets scared and fear is the first reason why banks stop lending and that is the first level problem. The second level is as NBFC problem has cropped up even when you cut interest rates, you see spreads which is between the government 10-year and the actual lending rate at which private borrowers are borrowing expand, which is again a reflection of fear.”
"So, a rate cut will work for the government because it will get to borrow at a lower rate but private borrowers may not get to borrow at lower rates and that is when the intervention will be required over a period of time," said Shrivastava.
First Published: Jun 13, 2019 2:47 PM IST