What are policy prescriptions for RBI post-corporate tax cut, troubling lack of depth in markets rally; all this and more on Moneycontrol Pro

  • Last week's tax cuts have enthused investors, with company earnings expected to benefit

  • The automobile sector is witnessing a bad phase and auto ancillaries are facing more trouble compared to OEM

  • Many investors and traders who could not participate in the rally have a feeling of having missed out

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The fine print in the corporate tax cuts

Last week’s tax cuts have enthused investors, with company earnings expected to benefit. All companies can pay tax at a basic rate of 22 percent, if they gave up exemptions, while new manufacturing companies need pay only 15 percent. This is against a basic rate of 30 percent for all companies while companies with up to Rs 400 crore of revenue pay 25 percent. The ordinance issued to implement these tax cuts throws light on exemptions that will go and what will stay. For a detailed analysis of the fine print around the tax cuts, click here.

 What are policy prescriptions for RBI post-corporate tax cut, troubling lack of depth in markets rally; all this and more on Moneycontrol Pro

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Post-corporate tax cuts, RBI has lots to do

Now that the government has given major tax concessions for the corporate sector, we can assume that the fiscal space which will be available for further action will be limited. Focus, therefore, will shift to monetary tools and the space available for further policy intervention. The caveat, however, is that monetary policy works a bit haltingly in India. In the current context, banks are seeking to improve their lot (it is certainly poor) by improving their margins and thus, try not to pass on the impact of policy rate cuts. Much the same sentiment prevails among NBFCs whose approach also is to place their own interests before systemic concerns. So what are the policy prescriptions for RBI? Read more.

A zero debt microcap with strong cash flows and low valuation

Moneycontrol Pro’s in-house analysts are constantly on the lookout for new stock ideas. Today’s pick is a microcap in the pharma sector. The firm focuses on active pharmaceutical ingredients (APIs) in anti-arthritic, anti-retroviral and nervous system therapeutic areas and derives 50 percent of its sales from exports to the regulated markets of the US and Europe. It has no debt, its working capital cycle is improving and there is enough cash in the books to expand capacity and for research and development. Read more.

Wabco and Bosch: What should investors do?

The automobile sector is witnessing a bad phase and auto ancillaries are facing more trouble compared to the original equipment manufacturers (OEM). Leaders in the auto ancillary space are no exception and have faced a sharp correction in their stock prices. Two companies with strong fundamentals and good long-term prospects but whose shares have declined are Wabco India and Bosch. Both are sound long-term portfolio candidates, primarily, due to their leadership positions in respective markets and a positive outlook for OEMs in the longer run. Read more.

The troubling lack of depth in the markets rally

In the history of Indian markets, the Sensex has never climbed more than 3,000 points in two consecutive sessions as it did since the finance minister announced the corporate tax bonanza. Many investors and traders who could not participate in the rally have a feeling of having missed out. But they are not alone, many stocks and sectors have not participated in the rally too, including some big names. A majority of companies have not beaten the benchmark indices. What does this mean? Read more.

Picks from our technical analysts

Adani Power: The share price closed on Monday above the previous swing high after a couple of days of decline. This is a trend continuation pattern. Click here to know about a futures trading strategy.

NTPC: The shares of NTPC are showing weakness in a strong market. Click here to know an options trading strategy.

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Updated Date: Sep 25, 2019 11:20:40 IST