14th May's MORNING NEWSLETTER .

Good Morning! The stimulus unveiled on Wednesday roughly amounted to Rs 5.95 lakh crore, leaving some Rs 6.7 lakh crore (2.3% of GDP) worth of more spending announcements to be made over the coming days. As economists counted the doles keenly to gauge the size of fiscal slippage, the government walked the tightrope tactfully, trying to evade a red flag from the rating agencies. Some estimates pegged the actual impact of the first batch of stimulus on the balance sheet at just Rs 55,500 crore, which left room for spending another Rs 1.35 lakh crore in further measures. By that measure, the government could be ending FY21 with a somewhat imaginable fiscal deficit of 6% of GDP. MARKET CUES: Where do we stand >>> Nifty futures on the Singapore Exchange traded some 130 points down at 7 am (IST) in signs that the market may see some profit booking. Nifty formed a 'Bearish Belt Hold' pattern on Wednesday as it could not hold on to its opening gains and closed near the day's low. Analysts say if the index fails to get past Wednesday's high of 9,585 in next two sessions, it will initially slide towards the recent low of 9,043. Options data indicated Nifty’s immediate trading range between 9,000 and 9,700 levels. India VIX moved up 1.65 per cent to 38.83 level, suggesting that higher volatility could continue to keep Nifty in a roller-coaster ride in a broader trading band. Elsewhere in Asia, shares opened lower in Tokyo, Seoul and Sydney, though declines were shallower than seen on Wall Street. Wall Street’s major indices closed lower for the second day after Fed Chairman Jerome Powell warned of extended economic weakness in the US. Dow fell 516 points, or 2.17%, S&P500 lost 50 points, or 1.75%, and the Nasdaq dropped 139 points, or 1.55%. Oil prices crept up on Thursday, supported by a surprise decline of US crude inventories. Brent crude futures rose 6 cents, or 0.2%, to $29.25 a barrel while WTI crude futures gained 8 cents, or 0.3%, to $25.37. The rupee appreciated by 5 paise to 75.46 against the US dollar on Wednesday as fiscal stimulus by the government bolstered investor sentiment The dollar held on to gains against major currencies after the US Fed Chair dismissed speculation about adopting negative interest rates. The greenback traded some 0.3% higher against the euro and was near a five-week high against the British pound. LOOK WHO'S FM walks a tightrope... Finance minister Nirmala Sitharaman rolled out the first instalment of the Rs 20 lakh crore economic stimulus, by offering loan guarantees and funds to small businesses, non-bank lenders and power distribution companies. The Rs 5.94 lakh crore package included a government guarantee for Rs 3 lakh crore collateral-free loans to small businesses, a Rs 20,000 crore debt fund for stressed MSMEs and a Rs 50,000 crore fund of fund to provide equity support. Bulk of the package is in the form of guarantees that require no immediate allocation from the Budget, implying limited impact on fiscal deficit and more room for support to other sectors. NBFCs, HFCs breathe easy... NBFCs and microfinance companies may see borrowing costs fall and liquidity increase with the Finance Minister announcing a Rs 75,000 crore package to help them tide over a liquidity crunch caused by risk aversion among investors. The proposal to have a special fund of Rs 30,000 crore and partial credit guarantee scheme worth Rs 45,000 crore could ease fears that some of these lenders could go belly-up due to tight liquidity. FM puts extra cash in pockets… The salaried class, employers, taxpayers and investors will have more money in their hands following the government’s decision to lower the rate of provident fund contributions to 10% for three months and a 25% reduction in rates for TDS and tax collection at source. The cut is expected to help address the cash crunch faced by businesses and individuals because of the Covid-19 lockdown. Discom distress addressed… PFC and REC will kick off the government’s Rs 90,000 crore liquidity infusion package in power sector within a couple of days by offering concessional loans to state electricity distribution companies. The package, announced by finance minister Nirmala Sitharaman on Wednesday, aims to help the power sector tide over an unprecedented cash crunch due to the nationwide lockdown to prevent the spread of Covid-19. AND WHO'S  Downgrades galore... Indian companies are getting downgraded at the worst pace ever, adding to challenges for policymakers trying to keep credit markets from seizing up amid the Covid-19 pandemic. For every upgrade of rupee debt of Indian firms since April 1, there have been about 11 downgrades, leaving this quarter set to be the worst on record, according to a review of moves by India’s four main credit assessors -- CARE Ratings, Crisil, ICRA and India Ratings & Research. Ratings have been cut for 847 domestic firms during this period. That’s pushing up refinancing costs, with spreads on top-rated three-year rupee company notes over similar-maturity Indian sovereign bonds rising to the highest since 2013. Powell’s distress call…US Fed Chair Jerome Powell on Wednesday said the threat of a lasting downturn in the US economy could deepen without additional government spending. He said the economy faces unprecedented downside risks that could do lasting damage to households and businesses if fiscal and monetary policy makers don’t rise to the challenge. “The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems,” he said in remarks at a virtual event. He said additional fiscal support could be costly, "but would be worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.” Job offers recalled… As Covid-19 puts brakes on businesses, ride-hailing company Uber has withdrawn job offers made during final placements to graduates across India’s top business schools. Placement cells said job offers had been revoked across leading IIMs, Management Development Institute, Gurgaon and Bhavan’s SPJIMR, even as Uber lays off thousands worldwide. Meanwhile... States’ coffers drying up... Twenty-one major states could be staring at a collective revenue loss of Rs 97,100 crore in April alone, according to a report by India Ratings (Ind-Ra) released on Wednesday. The disruption to the economy was so swift and severe that even if the lockdown was lifted in mid-May, economic normalcy would be unlikely until the second quarter of the fiscal, the report added.  HAPPY TRADING !!