Vision 2020: Sensex at 45,000, Nifty at 13,000! To get big benefit, this is what you should do

Indian benchmark indices, BSE Sensex and NSE Nifty have witnessed a tremendous upside movement right after the announcement of corporate tax rate cut by Modi government on Friday, September 20th. The 30 share BSE index has surged over 3,200 points in two days. Meanwhile, the 50 share NSE index has registered a massive 800 points recovery in these two trading sessions so far. 

This has forced many brokerages to raise their India Inc earnings estimates, Sensex and Nifty targets after the massive Rs 1.45 lakh crore corporate tax cut gift for Indian companies. Nomura has raised March 2020 Nifty target to 12,545, while Goldman Sachs has raised Nifty 50 target to 13,000 From 12,500. On the other hand, Morgan Stanley has raised Sensex target to 45,000 by June 2020.

Gautam Duggad, Head of Research, Motilal Oswal Financial Services told Zee Business Online, ''After a series of baby steps to boost growth over the past month, the Indian government took a giant leap on 20th Sep'19 by unveiling a big-bang fiscal stimulus in the form of a sharp reduction in the corporate tax rate from 30% to 22% and a fillip for investments in manufacturing. Last time, the corporate tax rates were cut by such a magnitude was in the famous 'Dream Budget' of 1997. With this step, the government has done its part for the time being, in our view. Now the ball is in the court of Corporates as to how they utilize this stimulus to drive investments and consumption.''

On Friday, the finance minister, Nirmala Sitharaman announced a cut in corporate tax rates to woo manufacturers and revive private investment in the economy. Though, the move will cost the government Rs 1.45 lakh crore in the current fiscal year in terms of lost revenue, but the Indian stock market seems extremely positive on this. 

Viewing this trend and massive recovery of Indian scrips, the brokerage houses have set new strategies for these Indian companies' stocks:

HDFC Bank, L&T, Bajaj Auto, Britannia, Colgate, Kalpataru, KEC, Maruti Suzuki, Siemens, Triveni Turbines, Eicher, Escorts, HSIL, India Cements, ITC, SCUF, Sun TV, Thermax, United Spirits, Whirlpool, Britannia, ONGC, BPCL, ICICI Lombard, ICICI Bank, Axis, SBI, RIL, Bajaj Auto, Hero, Eicher, HCL Tech, Jubilant Food, USL, Asian Paints are some of the companies who will get major benefits after the recent corporate tax cuts.

However, before investing, you must do the requisite homework on these companies and speak to experts to take a proper call.

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Sunil Tirumalai, Head Research and Strategist, Emkay Global Financial Services added, ''At the new tax slabs, India becomes aligned with regional peers, and indeed offers among the best tax rates for new manufacturing facilities. We see these measures as bringing India back into favor for FPIs: after factoring in just the base tax benefit increase of ~8.5% of large-cap indices, India’s PE premium over EM is still well below historical averages (~35% vs. 52% during Modi’s first term), even after Friday’s rally. We thus expect India to see a return of foreign flows — or at least stop underperforming other EMs on flows — thus overall supporting valuation multiples.''  

Markets are expected to react to the FM’s announcements in the coming week as well and the outcome of the GST Council meet will also be in focus. However, experts are expecting volatility to remain high in the coming week due to scheduled derivatives expiry on Thursday i.e. on September 26. Besides, global developments viz. US-China trade meet and geo-political tension between the US and Iran will further add to the choppiness.

''Indications are in the favour of further surge in the index but the move could be gradual from hereon. We feel sustainability above 11,250 in Nifty would be critical to carry this momentum. On higher side, 11,450-11,600 zone would act as hurdle while 11,000-11,100 zone will be crucial in case of profit taking.  We advise focusing on stock selection and trade management however it’s easier said than done after this vertical rise,'' said Ajit Mishra Vice President, Research, Religare Broking