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See fresh highs before Budget; like Maruti: Kotak Inst

Given that Indian equities are in a sweet spot, market should hold steady at current levels, says Sandeep Bhatia, Executive Director and Head of Sales at Kotak Institutional Equities.

Going ahead, market may witness fresh highs before the Budget, he says in an interview to CNBC-TV18.

According to him, autos space will be one of the biggest beneficiaries of the GST rollout. Although real benefits of GST will come after 2 years, it will mainly influence simplification of taxation, he adds.

Even though legislative changes will be fast if NDA gets majority in Rajya Sabha, Bhatia is confident of receiving positive news on electoral front.

Ahead of the Budget, he advises investors to buy interest rate sensitive and consumer durable stocks. Onto specifics, he is upbeat on Max India  and Maruti .

Below is the verbatim transcript of the interview:

Q: What is the immediate shorter term call, do you think the correction we saw in both the global markets and the Indian markets is over for now, it was just a routine end of year profit taking?

A: I would think so. I don’t think that I would expect any major fall in the markets in the next two weeks; that should not be the case. As Uday has been saying for the last couple of weeks that God is an Indian so a lot of things which have happened for India have been very positive in the global macro economic scenario. So, we have seen major corrections in oil prices, even if the Reserve Bank of India has not cut rates we have seen our 10-year bond yields come off.

The broader economic pickup is still to happen but that as I have been saying for sometime is six months away. So, on the whole I think India is in a much better spot as end of 2014 then most of the world; we can look around ourselves and we will see that fact. So, I would think market should hold steady here.

Q: The biggest positive for the next say couple of weeks or months could be the rollout of GST at least that is the indication you get from various experts that you speak to. In your mind how does one play that, what are the sectors or stocks that could benefit from GST?

A: There are a lot of issues on GST which need to be known before we make any broad or specific statements in terms of sectors. First, we still have to see what is the timeline of this, it will probably be April 16 is the assumption. However, if that happens the first one year is just ironing out the differences. Maybe we will start at a higher tax rate because there is a risk and there is an outlook that the state governments need to be compensated. So, I don’t think there will be a significant decline in taxes paid by businesses at all, it only will first simply matters, it will allow the movement of goods to take place. The real impact of GST in the first one year would be to give simplicity to the entire taxation process and make the movement of goods better across the economy.

Only when we see state governments getting more assured that there is no big decline especially even Octroi is supposed to be clubbed in, so, if we see that also the local bodies, municipal bodies also get their share of taxes, only then will tax rate start falling that will probably be after the second year. So, the first couple of years is just simplification and I would think therefore the entire economy benefits.

If at all there is any sector that benefits potentially it is the car sector because higher end cars probably have taxes which are in excess of 45 percent. In the GST regime, they will be in the region of 24-27 percent. So, there are some benefits in top end cars but broadly it is a macro economic benefit and the real benefit will flow in after two years if tax rates fall.

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