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What does the US Fed rate cut mean for India?
The US Federal Reserve lowered its target policy rate range by 25 basis points. The decision was not unanimous. Two members of the Federal Open Markets Committee (FOMC) didn’t want a rate cut this time, while one wanted a 50 basis point cut. That’s not all—the dot plot projections show that only seven of the seventeen members see another rate cut this year, which is at variance with what the market is expecting. The Fed indicated that the US economy is largely stable. Thus, a global growth slowdown & trade uncertainty largely explain the cut. A divided Fed also implies greater uncertainty from here on. What does it mean for emerging markets? Read more.
Are cigarette stock investors jumping the gun?
The government will promulgate an ordinance to ban e-cigarettes. It has treated this as a public health emergency of sorts. The ban led to cigarette stocks rising on Tuesday, a development that should puzzle any right-thinking investor. Does this mean that the long term potential threat posed by e-cigarettes to conventional cigarettes had been priced in the valuation of cigarette stocks? And, that the nullification of this future threat removed the discount and that’s why their shares rose. But shouldn’t investors be cautious because the government has taken a step that it believes is pro-health even if it’s anti-business? Read more.
Disinvestment policy should look beyond current revenue collection
The economic slowdown is hurting government revenue collections. Advance tax collection numbers show that the net direct tax mop-up so far this fiscal year is just 5 percent higher than a year ago. That’s far short of the 17.5 percent number the government is targeting. Indian companies are required to deposit 45 percent of their tax liability for the fiscal year by 15 September. So the prognosis is not good for tax collections. Faced with this uphill climb on taxes, naturally the focus will now turn to disinvestment to prop up government revenues. What can the government do to achieve the divestment target of Rs 1.05 lakh crore for the current financial year? Read more.
An auto ancillary company worth accumulating for the long-term
The auto industry is in a bad shape, but there are some auto parts maker who have a bright future. Today’s stock pick from our in-house research team is an auto ancillary firm which has been reporting stable revenues despite multiple challenges. It has been able to expand its operating margins consistently has well. Increasing content per vehicle due to safety regulations and new product launches in India are expected to help the company and make it worthwhile for investors with a long term horizon to consider. Read more.
BEML: What should investors do?
Once a laggard, BEML is making a comeback as a result of robust order inflows from the railways and metro rail projects, which together account for about half its total order book. With traction in new orders and other initiatives, the company is eyeing 20-22 percent growth over the next two years. That sounds good, but PSU stocks come with a lot of risks. Execution risks, delays in ordering, delays in payments leading to cash cycle inefficiencies etc. could hurt. Is the risk-reward ratio favourable? Read more.
Picks from our technical analysts
1. Apollo Tyres: This stock is moving in a steady uptrend and has recently made a consolidation pattern. A breakout from this pattern can be fast. Click here for a futures trading strategy.
2. Adani Enterprises: This stock is showing strength on a daily chart and has given a continuation bullish follow through pattern suggesting a move higher. Click here for a futures trading strategy.
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Updated Date: Sep 19, 2019 13:34:56 IST