BUDGET 2020 HIGHLIGHTS

Budget 2020: Cut in personal tax possible, but not as much as corporate tax...

While we believe there is a strong possibility that the government will make some changes on the personal tax front to boost consumption, it may not be as radical as the one on corporate tax rate given the fiscal constraints, Jyoti Roy, DVP Equity Strategist, Angel One, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpt:
What is your outlook for 2020? 2019 ended with gains of 12%, do you think we could do better in 2020?
We think that 2020 should be a better year for the markets as compared to 2019. Just looking at the Sensex numbers for 2019 is misleading as mid, and small-cap space has been under tremendous pressure in 2019 despite the Sensex doing well. While a 14 percent kind of return on the Sensex is very much achievable for 2020 we believe that the mid and small-cap space is much more attractive at this point. So while we expect the Sensex to do well in 2020 we believe that the mid & small cap would outperform the Sensex in 2020.

Do you have a Sensex or Nifty December-end target for 2020? If yes, what is the basis of your assessment?
While we do not have any year-end Sensex target we do expect that the broader markets should do much better in 2020. While the Nifty and the Sensex have been making news highs in 2019 the mid and small-cap space has been under tremendous pressure. We expect that the mid and small-cap space would do much better in 2020

What are your expectations from the Budget? Do you think we could see a personal tax cut in the coming year? If yes, will it be a major booster for equity markets?
The consensus in the markets is that the Government is going to make changes to personal tax which could be either in the form of a cut in tax rates or readjustment of the slabs. While we believe that there is a strong possibility that the government will make some changes on the personal tax front to boost consumption, it may not be as radical as the one on the corporate tax rate is given fiscal constraints.

Which sectors are likely to hog the limelight in the year 2020 and why?
We continue to remain positive on private sector retail-focused banks as they continue to do well. We are positive on large corporate banks as we believe that their NPA related issues are now well behind them and we expect them to post a significant increase in profitability over the next 2-3 years. We are also positive on the consumer staples and discretionary space as we expect them to do well next year as demand revives

Do you think we could see a revival in the small & midcap space?
We do expect a revival in the mid & small-cap space next year. However, we expect this rally to be different from the previous rally in the sense that the market would be focussed on quality. Mid & small-cap stocks with good businesses that are now available at reasonable valuations would be the one that would generate alpha for investors in 2020.

What should be the investment philosophy for investors in 2020?
Investors should focus on buying into quality business even if they are available at a slight premium and avoid companies with corporate governance issues. When the market revives next year market would focus on quality.

Do you think growth has bottomed out in the September quarter? And, the likely outperformers could be the small & midcaps in 2020 compared to large-caps?
A) Yes, we do believe that growth has bottomed out in the September quarter. GDP growth rate of 4.5 percent for Q2FY20 should mark the bottom in terms of growth rate. High-frequency indicators like the PMI and auto sales numbers are already pointing to revival on the ground. We expect growth to pick up gradually from here over the next few quarters and we expect a full-fledged recovery in the second half of 2020.

Do you feel earnings growth will recover from FY21?
Yes, we believe that earnings growth would pick up from FY21. Post the Q2FY20 numbers consensus is for 23 percent YoY growth in the Nifty EPS for FY21 which is likely to be driven by a turnaround in large corporate banks along with the benefit of lower tax rates for the full year.

What are the key takeaways or lessons for investors for the year 2019?
We believe that the key takeaway from 2019 should be that one should stick to quality and avoid companies with very high leverage or corporate governance issues. Companies with the quality business franchise, low leverage, and good corporate governance were able to withstand the NBFC crisis significantly better than others.

10 money-making ideas from top brokerages ahead of Budget 2020

Domestic equity indices kicked off the week on a pessimistic note on Monday, as coronavirus scare haunted markets globally. NSE’s 50-share Nifty index slipped nearly 90 points, or 0.73 per cent, at 12,158 in the early trade.

Markets across Asia traded mostly in the red, as did US stocks futures.

Projections of a sharp drop in the government’s tax collection this year also weighed on investors’ sentiment. Analysts said the domestic market is likely to remain cautious and rangebound through the week ahead of this weekend’s Union Budget.

“The weightage of Nifty50 stocks is now tilted more on the negative side, with 69 per cent of them in ‘sell’ mode. This pre-Budget week would trigger a lot of movement in share prices. Nifty’s key support is seen at 12,030 and resistance at 12,460,” said Vaishali Parekh of Prabhudas Lilladher.
Based on the recommendations of various broking houses, here are 10 stock strategies that can potentially deliver solid gains over the next 11-21 sessions:-
Ajit Mishra, VP Research, Religare Broking

ICICI Prudential Life Insurance | Buy | Target price: Rs 535 | Stop loss: Rs 504
ICICI Prudential rallied on Friday after forming a fresh buying pivot on the daily chart. It has also surpassed the hurdle at Rs 515 and likely to carry the prevailing momentum. Traders can initiate fresh longs as per the given levels.

Petronet LNG | Buy | Target price: Rs 292 | Stop loss: Rs 270 Petronet has been consolidating in a range over the past two months, after making a new record high. It is strongly holding above the support zone of the 100-day exponential moving average (EMA) during this phase and is ready to resume the uptrend.

Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel One
Equitas | Buy | Target price: RS 126 | Stop loss: Rs 101.40 For last one month, stock prices have been in a quiet phase with no major action seen. On the daily chart, the prices have finally broken the consolidation range confirming an Inverse Head and Shoulder breakout. The said breakout is supported by a bullish candlestick and increasing volume. In addition, prices have closed above the higher range of Bollinger Band, suggesting a trending up-move in the near term after its recent consolidation phase.

Strides Pharma Science | Buy | Target price: Rs 448 | Stop loss: Rs 396
In the past couple of weeks, the midcap pharma space has shown strong outperformance and this stock as well has seen a sharp up-move in this month from its recent swing low of Rs 360. On the daily chart, prices have closed above their previous swing high around Rs 410, which thrice acted as a stiff resistance and have now confirmed a & ‘Cup and Handle’ bullish breakout. In addition, prices on the weekly chart have closed above the & ‘Super Trend’ indicator, suggesting a strong trending up-move in the near term.

M & M Financial Services | Buy | Price target: Rs 403 | Stop loss: Rs 349
On the daily chart, the stock has broken the range on the upside after trading in a broad range of Rs 320-360 in last two months, which confirmed a bullish breakout from the rectangular channel. In addition, prices have closed above the trend line, joining the lower tops, which indicates a change in polarity. Moreover, the stock is witnessing a bullish crossover with the 50EMA crossing the 89EMA level from below. Momentum oscillator RSI is in the positive zone, supporting a buy call.

Top 5 expectations from Budget 2020; L&T, UltraTech top stocks to buy: Angel One

Given the recent slowdown in the economy, there are expectations that the budget would contain bold measures to boost the economy, Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd said in a podcast with Moneycontrol.

Tight fiscal and monetary policy over the past few years coupled with major structural changes have taken a toll on growth which was further exacerbated post the IL&FS crisis and its fallout.

Given the shortfall in tax collections as well as lower non-tax revenues (on account of shortfall in disinvestment targets), markets are concerned about fiscal slippage in FY20 and FY21.

While the corporate tax cuts were a game-changer move by the Government and would go a long way in attracting investments over the medium term we believe that more needs to be done in order to boost consumption demand which has slowed down sharply from 10.6 percent in Q4FY18 to 5.1 percent in Q2FY20.

Given the severity of the slowdown, we feel that expansionary fiscal and monetary policy is the need of the hour to revive the economy.

Here are five expectations from Budget 2020:
1) Personal income tax:
The Government can try and address the slump in consumer spending by providing tax breaks to the middle class which could be either by the way of restructuring the tax slabs or by increasing the limit of the deductions under Sec 80 C.
2) Housing:
The Government is expected to continue its focus on affordable housing and we could see greater allocation under the Pradhan Mantri Aawas Yojna along with a focus on execution. The Government could also increase the tax exemption limit on housing loan interest from current levels of Rs 2 lakh. The Government could also look at expanding the scope of affordable housing by increasing the carpet area as well as the ticket size.
3) Auto:
The government is expected to announce measures to shore up the auto industry which was impacted by the credit crisis and implementation of BS6 norms from April 2020. There is a very high probability that the Government will announce an incentive-based scrappage plan in the budget which will benefit the sector, especially the MHCV space, which has been the worst impacted.
4) Make in India:
In line with the recommendations made by the commerce ministry, the Government can hike import duties on various items like paper, footwear, rubber items, and toys as well as address the issues of inverted duty structure in a certain sector like chemicals, furniture, rubber paper, etc.
5) Abolition of LTCG on equities and DDT:
There are expectations that the Government may abolish LTCG on equities while the definition of the long term can also be changed from one to two years. There are also expectations that the Government might do away with the Dividend Distribution Tax DDT on equity given that the Government wants to attract investments.