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ICICIdirect Research Posted on 05:31pm 17-Oct-2019

Muhurat Pick - 2019

Wishing you all a Happy and Prosperous Diwali!

The pain in Indian equities was reflective as certain key sectors such as Auto witnessed sharp volumes decline, while overall GDP in Q1FY20 dipped to six years low of 5%. Recent drive of reforms from government is likely to be a key enabler of economic recovery, going ahead. Most importantly, the government announcement of reduction in the corporate tax rate from ~34% to 25.2% is a massive trigger for revving up corporate growth. The immediate benefit is increased cash flows to Corporate India that will be either channelised into debt reduction or incremental investments in increasing capacity. Also, taxing new production facilities (that come up by 2023) at 15% will enable attraction of global capital and spur a beleaguered investment cycle.

Going ahead, on the domestic front, we are of the view that with benign interest rate scenario (expect more rate cut of 25-50 bps ahead in FY20) amid controlled inflation and proactive measures of government will boost the affected sectors. This will bring growth recovery back on track. Nifty earnings, given the benefits of tax cuts and improved demand is likely to witness a healthy 20%+ CAGR over the next two years. 

Given the scenario, we see value emerging across the market cap spectrum with key filter being quality. We continue to advise investors to utilise equities as a key asset class for long term wealth generation by investing into quality companies with strong earnings growth and visibility, stable cash flows, RoE/RoCE.

Read the full report here