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Indian shares tumbled on Monday, with banks leading the fall, as investors were disappointed by government measures to aid an economic recovery, even as domestic cases of the novel coronavirus continued to rise steadily.

A slew of announcements from India’s finance minister that concluded on Sunday, largely comprising liquidity measures, have fallen short of market expectations due to the lack of enough measures to boost immediate demand and consumption.

The package was billed by Prime Minister Narendra Modi as 20 trillion rupees ($265 billion) in fiscal and monetary measures, or about 10% of India’s gross domestic product (GDP), but economists say the direct fiscal outlay amounts to less than 1% of GDP.

“People generally were expecting immediate spends to revive the economy, which is not happening,” said Deepak Jasani, head of retail research at HDFC Securities in Mumbai. “Our (economic) recovery will be very slow and laboured.”

On Sunday, Finance Minister Nirmala Sitharaman said India would stop fresh insolvency cases for a year to avoid bankruptcies from firms hit by the COVID-19 pandemic, causing banking stocks to plunge on Monday.

“It will affect slippages and recoveries for banks in a big way,” Jasani said, referring to a fresh jump in bad loans.

Goldman Sachs on Sunday estimated that India’s real GDP would fall by 5% in 2020/21, sharply lower from an earlier projected 0.4% fall.

The NSE Nifty 50 index fell 3.05% to 8,857.90 by 0530 GMT, while the S&P BSE Sensex slid 3.09% to 30,137.63. The Nifty 50 slipped below the 9,000 level for the first time since April 22.

The Nifty banking index fell 6.25% and was on course for its worst day in two weeks. The top five drags on the Nifty 50 were lenders. HDFC Bank Ltd fell 4.7%, while ICICI Bank Ltd fell 8.1%.

Shares in drugmaker Cipla Ltd jumped 3% after March-quarter results on Friday and its filing of a new drug application for a generic version of GSK’s blockbuster lung drug Advair.

India on Sunday extended a nationwide lockdown to May 31, while easing some restrictions, but a ban on air travel and gatherings at several public places still remained.

The country’s tally of COVID-19 infections surged past 96,000 on Monday, while deaths surpassed 3,000.

Meanwhile, other Asian shares were led higher by S&P 500 futures on Monday as countries’ efforts to re-open their economies raised hopes of a pick up in economic activity.

Separately, Goldman Sachs expects India’s economy to shrink 45% on an annualised basis in the quarter to the end of June, and by 5% in the whole of the 2021 fiscal year running till next March, showing the economy contracting far more than previously expected.

“The deeper trough in our second quarter forecasts reflects the extremely poor economic data we have received so far for March and April, and the continued lockdown measures, which are among the most stringent across the world,” the investment bank said in a note dated May 17.

Goldman had earlier projected the country’s GDP to contract 20% in the second quarter and 0.4% for the financial year ended 2021.

Prime Minister Narendra Modi announced a nationwide lockdown from March 25 to contain the spread of the coronavirus, but Asia’s third-largest economy has taken a huge hit as a result, with almost all economic activity coming to a grinding halt.

On Sunday, India extended the lockdown to May 31, allowing for some relaxations.

Finance Minister Nirmala Sitharaman outlined measures aimed at kickstarting the economy in a series of media briefings last week, but Goldman analysts said the reforms were more medium-term in nature, and they “do not expect these to have an immediate impact on reviving growth”.

The investment bank said it expects an annualised rebound of 20% in the third quarter, but a gradual recovery of 14% and 6.5% respectively for the fourth quarter and first quarter of the next financial year.

Restarting the country’s economy has continued to pose challenges, Goldman said, especially in containment “red zones”, which account for about 45% of GDP.

Supply chains are improving, but are still operating at low levels, along with missing logistics and weak end-demand, according to the note.

Earlier this month, analysts at Moody’s said they expected India to see 0% expansion in the current fiscal year.

Separately, Indian lenders are facing a jump in coronavirus-related defaults on credit card dues, personal and vehicle loans, forcing them to set aside hundreds of millions of dollars and take steps like asking sales staff to track down borrowers who have vanished.

Reuters