Dearness Allowance hiked 5%! Money gift for central government employees from Centre has this BIG impact; know why

Centre has finally declared Dearness Allowance hike for central government employees. Yes, employees have received a big gift before Diwali this year! The impact of this huge announcement was not only good for government staff members, it was equally beneficial for something else too - stock markets! The Indian indices on Wednesday finally ended their losing streak after bleeding for six straight trading sessions. And the big reason thereof was the 7th Pay Commission (7th CPC) linked dearness allowance hike of central government employees. So, while the BSE Sensex skyrocketed by a whopping 645 points to close at 38,177, the 50-stock NSE Nifty index shot up 186 points and closed at 11,313. Bank Nifty index skyrocketed 1,018 points and closed at 28,785 levels.

Siddharth Khemka, Head - Retail Research, Motilal Oswal Financial Services said, ''Cabinet today approved an increase in Dearness Allowance by 5%, taking it up from 12% earlier to 17%, thus benefitting over 1 crore government employees and pensioners, which may boost consumption.''

Expectations therefore, are that a huge part of this 7th CPC-linked DA hike money that central government employees will get will be spent during the festive season on buying products. This consumption spree is what investors bet on today to drive the stock markets up to dizzying heights. Indeed, The DA hike came as good news for both central government employees and stock markets alike!. 

The impact was visible in today's trade session on stock markets after Modi government declared the increase in dearness allowance (DA) of employees and dearness relief (DR) for pensioners by 5 per cent, which is by far the biggest benefit for central employees. Also, there are over 1.1 crore central employees and pensioners who will be directly benefitted.

In the meeting of the Union Cabinet chaired by Prime Minister Narendra Modi, it was decided to increase 7th CPC-linked DA of government employees. This time the DA has been increased by 5% and with this increase, the salary of the employees getting 7th pay commission pay scale will get an increase from Rs 900 to Rs 12,500 per month.

Coming back on the domestic markets going forward, Khemka said, ''Nifty formed a Big Bullish Candle on the daily scale and negated the formation of lower top - lower bottom on the lower time frame. Now it has to hold above 11250 zones to extend its move towards 11400-11450 zones while on the downside major support is seen at 11100 zones''