Post lockdown India has been going through some reformations including the big decision of cutting the corporate taxes. which is likely to have both short term and long-term implications. I strongly think that the markets are moving in hope of further such policy announcements. There are also some known speculations about even last evening there being an announcement that focuses around fixing the financial system, which is pretty much in in in the front and centre of what is the actual cause of this recent economic slowdown.
So there is a reason to be hopeful that the budget in February could host more announcements that are culminating in the budget. There is also this possibility of seeing some personal tax reduction as well. we can say that the market is clearly moving ahead of the fundaments in anticipation tho these reforms and stimulus announcements, which could be the key ingredient that eventually stages the recovery in terms of economic variables and corporate profitability. This also promotes the idea of uncertainty through a macro outlook.
They believe the earnings growth of 15-20 per cent does not look impossible, but it is slightly optimistic. However, if the government takes policy action, leading to a pick-up in the economic momentum, 15-20 per cent earnings growth is possible; the markets can sustain in that case.
“With returns more than 40 per cent for most investors in a matter of a few months”. The Indian market, without some significant positive news flow, might not be able to hold the weight of these levels in the following three months. There is more than 50 per cent possibility of a five-seven per cent correction. But the government can surely change this with some reasonable announcements on reforms… if that happens, it is fine,” said Dalton Capital Advisors Managing Director U R Bhat.
you should be making the case of buying strong companies which have a strong corporate governance.
Companies with strong corporate governance ?
For the last 5 years, India is going through a massive internal structural change. For example, in the events of some structural changes that happened in the last 5 years that you’ve seen is the demonetization. You have also seen some of the biggest tax change in terms of implementing a national indirect tax regime through GST. And we can name several more instances like this. These are the signs that the country is going for a more formalized approach and is getting more organized.
So that this result in the larger players in any industry being able to continue their demonstration of dominance and growth despite a lot of this sort of macro slow down taking the market share. so that the investment as a collar from the eventuality that you look for strong franchises which are dominant and with strong competitive governance.
We can take a look at the given demographics and look for companies which are having strong and comparative corporate governance. And with these recent in the last 12 months with supporting announcement of tax reduction from the government, it is clear that the market is clearly going on a forward trajectory.
Therefore, one thing is evident that markets have recovered well after the onslaught observed in the months of February and March of 2020. With markets touching newer highs despite no real improvement in GDP, IIP or other macroeconomic indicators to show for it.
This strategy can be proved vital for the dominant company in their respected industies. the market will be a premium for that so Some of these companies which is likely to get a new now portfolio are the likes of
1.HDFC bank codec.
2.Kodak Mahindra Banks
and so on.