The announcements are unlikely to give any major lift to market sentiment on Monday. The increase in the FDI limit in defence sector to 74 per cent is a big long-term positive

NEW DELHI: Finance Minister Nirmala Sitharama’s Stimulus Part IV had a slew of big reforms for mining and defence sectors. There were also some announcements for aviation and power sectors, which analysts saw as long-term positives.

But, given that investors were seeking short-term Covid-19 relief, these announcements are unlikely to give any major lift to market sentiment on Monday, analysts said.

The increase in the FDI limit in defence sector to 74 per cent is a big long-term positive for companies such as L&T, Bharat Forge and Bharat Electronics while auctioning of coal blocks may not have much of a negative impact on Coal India, as the announcements were in the works for some time, said analysts. Marketmen do not expect the broader market to react much to Saturday’s announcements.

“Reforms in the defence sector are particularly path breaking. The announcement of negative list for equipment and platforms will catalyse massive investments from the private sector. Many foreign players would now be comfortable venturing into India,” said Ajay Bodke, CEO of PMS at Prabhudas Lilladher.

Bodke believes L&T, Bharat Forge, Mahindra Defence and Tata Group’s defence company will be large beneficiaries in the long term. Among PSUs, Bharat Electronics could be a major beneficiary, he said.

The announcements for the mining sector were mostly reiteration of the policies that had been announced previously, he said.

Nearly 50 coal blocks will be auctioned immediately, the Finance Minister said. This will be done via a revenue-sharing mechanism replacing the fixed rupee per tonne regime. Any party could bid for coal blocks and sell in the open market, the FM said. This is against the earlier norm where only captive consumers with end-use ownership could bid.

An analyst who did not wish to be named asked: "Are we talking about corporate reforms or COVID-19 relief package?"

"The direction is hijacked. Where is the need for reforms? Which corporate sector is going to put money when everybody is worried about poor capacity utilisation? Reforms are surely long-term positives, but are no COVID-19 relief," he said.

Dhiraj Relli, MD & CEO at HDFC Securities, said the impact of these announcements will be limited in the near term. “Some of these may require legislative approval, states’ cooperation and signal from judiciary about being quick in decision making and fair to bidders. Also, a lot of these measures need not have waited for COVID-19,” Relli said.

In a boost to defence production, the FDI limit in defence manufacturing under the automatic route has been increased to 74 per cent from 49 per cent. The government said it would notify a list of weapons and platforms for ban on imports with year-wise timelines. The government also announced plans for indigenisation of imported spares.

"For us, this is a dream come true," said Baba Kalyani, MD of Bharat Forge.

"This will create a new industry, new employment, new technology and capabilities," Kalyani told ETNOW.

“Mining and defence sector announcements stood out. They are going to have a long-term positive impact. Coal sector announcements are negative for Coal India, but the stock was already pricing in the same,” said Sanjeev Hota, Vice-President and Head of Research at Sharekhan.

Hota said: “What the market wants is the near-term booster shots from the government. Today’s announcements will take time to reflect in the economy. Given the challenging times, the market is not in a good position to react positively to every good announcement.”

Relli said measures related to power generation and distribution and mining are welcome, as they can make an impact if states get on board soon leaving aside their political compulsions.

“Measures on defence and space will lead to an uptick in stock prices of some companies for a few days. But one will have to watch as to how fast the intent is converted into execution,” Relli said.

For the aviation sector, the FM announced efficient airspace management. Noting that only 60 per cent of the Indian airspace is freely available, the government has decided to ease the restrictions on utilisation of air space so that civilian flying becomes more efficient. The move is seen to bring in benefits worth about Rs 1,000 crore per year for the aviation sector due to reduction in fuel use and time.

The FM also announced privatisation of power utilities in the Union Territories. "It would reduce cross-subsidies," she said.

"FM's structural reforms announcements take the policy of going 'vocal about local' forward. Indigenisation of imported spares, corporatisation of Ordnance Factory Board & listing in the stock exchange are indeed bold structural reform measures," said VK Vijayakumar, Chief Investment Strategist of Geojit Financial Services.

“Auctioning of six more airports and privatisation of DISCOMS in UTs are welcome. In brief, liberalisation is in fast forward mode," Vijayakumar said.