Marcellus Investment Managers on Tuesday said quality companies will benefit disproportionately from corporate tax cut announced the Narendra Modi government last week.
In an interview to CNBC-TV18, Rakshit Ranjan, portfolio manager, said, "At a market level, more debt-laden companies will witness the negative effect of this move as their cost of debt will rise as government’s requirement for borrowing rises in the wake of this tax cut. Also the weaker B2B companies, whose negotiating power is not high will come under pressure. Meanwhile, companies with stronger balance sheets will benefit from increased earnings."
Post the announcement, the house hasn’t realigned the portfolio, said Ranjan, "We had 13 stocks in our portfolio before the last two days and we continue to hold on to them. For almost all of our portfolio companies, the optical increase in their earnings could be 10-15 percent each."
Talking specifically on information technology sector, he said, "One has to be cognizant of the high possibility of rupee depreciation being offset by broader disruption thrown at IT companies. TCS would be a good buying opportunity although they do not have it in their holding portfolio but have coverage on it."