Time To Pick Deeply Discounted Stocks Of Promising Sectors
There is plenty of action happening in the Indian economy as we get ready to bid adieu to the year 2018. Looking at the past week, the GST Council last Saturday has reduced GST rates on about 22 items giving the end-consumer a new year’s gift as this will come into effect from the first day of 2019. Items such as 32-inch TV sets, power banks using li-ion batteries, used rubber tyres, digital cameras and video recorders, video game consoles and other sports equipment from 28 per cent tax bracket to 18 per cent. Also, the tax slab for auto parts like pulleys, transmission shafts and cranks, gear boxes etc. have been shifted to 18 per cent tax slab. This rate cut would make products and services less expensive than earlier which in turn would lead to a higher demand for the respective products and services. Besides, the continuous decline in oil prices is likely to help the Indian economy to keep its fiscal deficit in check.
Meanwhile, on Wednesday, representatives from NBFCs met Prime Minister Modi to discuss issues they are facing due to liquidity crunch triggered by the IL&FS default. NBFCs and housing finance companies need funds to keep their growth engine running, but during these stressful times, lenders are reluctant to lend. It would be interesting to watch how the government plays its role in reviving the sector.
The Union minister Suresh Prabhu said that the Ministry of Commerce is planning to impose additional import duty on aluminium products to protect domestic players. In addition to this, the domestic producers are asking for minimum import price and some kind of quota on the imports for the end-consumer industries. At present, aluminium scrap and primary aluminium attract 2.5 per cent and 7.5 per cent import duty, respectively. If additional import duty is imposed, domestic players will have a competitive edge.
As decided in the previous RBI and government meetings, the country’s central bank has formed a committee headed by Bimal Jalan, former RBI governor, to look into economic capital framework and RBI’s reserve policy. At present, RBI holds around 27 per cent of its assets as reserves, while the government is of the opinion that globally central banks keep 13-14 per cent of their assets as reserves.
Indian stocks started off the year 2018 on a good note and market participants were expecting a big bang during the year, which did not happen. After LTCG was reintroduced in the Union budget (February), the market reacted negatively and started its southward journey. Factors such as realignment of mutual fund schemes, global trade war, rising crude oil prices, rupee depreciation, etc. caused erosion in gains earned by investors in 2017.
Going forward, we urge our investors to look for the beaten down sectors that have the potential to deliver stellar performance in calendar year 2019. But do not get overloaded with any particular sector as you may feel let down if that sector goes through some turmoil. We are sure every investor was terrified with the NBFC situation after the default by IL&FS. At this point of time, few quality stocks from smallcap and mid-cap space are available at attractive discounts, which could deliver good returns if the overall market sentiments turn favourable. The time appears to be apt to remember Warren Buffet’s quote “Cash combined with courage in a time of crisis is priceless”.
