IMF report warns of rising risks in economy, Reliance in bullish trend; all this and more on Moneycontrol Pro

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Lower taxes mean higher earnings but that’s just the tip of the iceberg

A number of companies have declared that they have shifted to the new lower corporate tax rate while declaring their September quarter earnings. Their post-tax profit rose by a much higher rate than PBT. While the earnings bump is good news for shareholders of these companies, the tax cuts’ effects don’t end there. For instance, HUL’s management mentioned it was working on different scenarios on how to reorient manufacturing and its supply chain. This could mean significant changes to how it has done business. Other companies who shift to the new tax regime are likely to undertake a similar exercise. Their decisions could unleash a wave of change in how companies do business. While this may seem an ambiguous statement at this point, here are a few scenarios that could make them more tangible. Read more.

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IMF report warns of rising risks in economy, markets and firms

While markets across the world have been buoyed by loose financial conditions ever since the financial crisis, there have been a few voices in the wilderness warning that we are setting ourselves up for a massive fall in the medium-term. The International Monetary Fund’s(IMF) October 2019 Global Financial Stability Report is one such voice of caution, telling investors there will be a hefty price to pay for the liquidity-fuelled binge. The IMF says that ultra-low and negative interest rates have led to a desperate search for yield among investors, leading to overvaluation of assets. Even conservative institutional investors such as pension funds have been investing in riskier and illiquid alternative assets, such as private equity, in order to increase returns. Read more.

Compelling valuations, strong growth make this construction company a good investment

A major beneficiary of consolidation in the construction space, this company has rapidly built a scalable competitive business. Today it’s a dominant player in the metro construction space with proven capabilities and has one of the best project-winning ratios in the industry. Moreover, its strategy of owning most of its equipment and not resorting to subcontracting has helped it develop strong competitive advantages. Today it enjoys one of the highest EBITDA margins in the industry (16.7 percent). Click here to know more details about this pick from our in-house research team.

Q2FY20 review: Federal Bank

Federal Bank’s reported profits for the September quarter looked strong aided by lower taxes, but there were several areas of disappointment. While the tax bounty has been used to beef up provisions, and hence welcome, higher slippages from the corporate book, sharp decline in interest margin, rise in one-off costs and softer credit growth were the areas that took the sheen off the reported numbers. The stock has also underperformed both the benchmark Nifty and Bank Nifty in recent times and is a whisker away from its 52-week low price. Still, our in-house analyst believes that this weakness may be an opportunity to gradually build up a position for the long-run as the bank’s strategic intent inspires confidence. Read more.

Picks from our technical analysts

Reliance: Reliance is in bullish trend, but near its resistance level. Our chartist is assuming that it will remain between 1320 and 1420. Click here for an options trading strategy.

IGL: This stock has formed a bullish continuation follow-through. Also, it is one of the outperformers in the future segment. Click here for a futures trading strategy.