Following months of flagging growth and tepid market performance, finance minister Nirmala Sitharaman announced a raft of measures on Friday that ultimately saw the BSE Sensex and Nifty achieve record highs by the time the markets closed.
Mihir Vora, director and chief investment officer, Max Life Insurance, in an interview with CNBC-TV18 said that the corporate tax rate cut announced on Friday is unique and would lead to an 8 percent uptick in the Nifty earnings.
The move makes a case for changes in the long-term re-rating of Indian economy because when more money is left with the corporate sector, it is likely to be invested in more efficient sectors, which would lead to long-term re-rating of GDP growth rates of the country, said Vora.
“Consumption has been doing well for the past few years based on government spending but in long-term it is time now to move back gradually but surely to the investment thesis for India,” added Vora.
However, one must now be cautious and not just chase stocks because they are moving and make your investment thesis rationally, he advised. “Consumption will do well for India but the investment thesis for capital goods, infrastructure, building companies, equipment manufacturer etc. have been neglected for quite some time. So stick to basic fundamentals of trying to predict in which stocks and sectors growth is likely to be and take long-term view with emphasis on valuations,” he said.
“Basically the paradigm shift in belief of the government to deliver on reforms is what one should bet on for the next three years,” said Vora.
When asked how to approach consumption space, he said: “Purely on valuations they do look cheap but while the corporate tax rate cuts is usually positive for corporates, it may be a bit neutral to negative on consumption side because the kind of fiscal deficit increase that we are probably going to see leaves little room for state and central governments to spend any more on consumption.
“So we could see some curtailment of spending at state and central level. Therefore, I do not see any immediate turnaround for the consumption side just because of this action,” he added.
The house would continue to remain upbeat on private sector banks than public sector banks, he said.