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I am not going to pick and choose, almost the entire market is a buy: N Jayakumar

ET Now|
Sep 21, 2019, 11.39 AM IST
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N Jayakumar-Prime Sec-1200

Highlights

  • Massive PAT and earnings upgrades are coming up for 2020 and 2021
  • Nifty could be up 15% from here over the next six to nine months
  • The time to invest is right now.
Nifty could be up 15% from here over the next six to nine months. Every single company that was in the 35% full tax bracket is getting a 33% gift if you will from the government in terms of money coming back, says N Jayakumar, MD, Prime Securities. Excrpts from an interview with ETNOW.

The FM’s announcements yesterday have clearly changed sentiment. Does it stroke animal spirits? Do we see an on-ground recovery coming back for the economy?
What you have seen in terms of the stock markets today is just a trailer. The markets have not fully soaked in the fact that this is probably the single biggest tax cuts and tax reforms in the history of Indian capital market ever. I choose these words extremely carefully when I say it. This is absolutely unprecedented and for sure, it will stroke animal spirits in a major way.

The point about new companies coming and setting up bases in India with a 15% tax rate is historic. And tax cuts from 35% to 25% is actually 33% tax outflow that has been prevented for corporates. The government seriously means business and they have indicated that in every one of these five or six measures given yesterday.

In fact, I am surprised the markets have only reacted as much as they have. Some of the moves will continue over the next few days and I expect a lot of foreign money to come in equity. There is a lot of debt available in the Indian markets and a combination of these two will spur investments pretty significantly.

hen we just talk about the move today, do you think it was also because there was a lot of pessimism in the market. A lot of people had given up hopes on the Indian market in the last two-three months?
No question about that. Maybe short covering was the only significant kind of activity yesterday. But I personally believe that an index level of 11,200-11,300 maybe a thing of the past very soon because we have to see this in the context of massive PAT upgrades and therefore massive earnings upgrades coming up for 2020 and 2021.

In that context, every single company that was in the 35% full tax bracket is getting a 33% gift if you will from the government in terms of money coming back.

It also impact the entire NCLT process where the removal of MAT means people can bid higher for the same assets. Let us say there is Rs 50,000-crore debt that gets settled at Rs 30,000 crore. On Rs 20,000 crore, they typically would have booked profits to pay, which is not the case anymore. So, there is benefit across the board.

Banks are very big beneficiaries because they are full tax payers and to the extent that the investment cycle kickstarts, to the extent that there are naysayers who still believe that Rs 1,45,000 crore given up will actually be losing of the fisc. I am absolutely sure that in the next few weeks, you will see big bang announcements in terms of strategic sales like in Air India. These strategic sales will result in huge amounts coming to the government and will help make up for the Rs 1,45,000 crore revenue loss at least as far as this year is concerned and going forward for the next couple of years.

What next for equity market participants? The naysayers were caught completely unaware. If you were to go buy afresh, what would you select from? Would it be the FMCGs, the autos, the beaten down names and the higher tax payers amongst India Inc?
If you ask me, pretty much the market is a buy. I am not going to be particularly picking and choosing one or the other. A lot of sectors now offer scope. The entire infra space, the entire banking space, PSU banks, private sector banks, some of the FMCGs are richly valued. I am a little reticent to go into those.

I personally believe the Nifty could be up 15% from here over the next six to nine months. If you see the index move being that sharp and sort of that pronounced, individual stocks will go up much more.

If one has to allocate as you said, there is a section of the market which is looking expensive. When you look at the earlier moves, expensive stocks also tend to catch up in terms of earnings. Will traditional consumer and IT names continue to see upgrades?
The upgrades will come from full tax-paying companies and then as second order derivative, as and when the demand picks up in specific spaces, you will have earnings upgrades.

Sentiments have improved or sentiments will improve and markets will factor in early. Is this the time to invest?
Absolutely, the time to invest is now.

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