Expect market to open on a strong note on account of strong domestic cues. Government cut corporate tax rate and it will be big positive in the market despite Nifty and Bank surged 6% and 10% on last Friday. Expecting a short covering move as well ahead of September F&O expiry. Traders, investors can use the opportunity to buy on every rise in the market like Banking, Auto, metal, cement, OMCs, FMCG stocks. SGX Nifty is up 86 points or 0.8%. US Future is up 127 points or 0.5%.
Reduction in the corporate tax rates will result in 8% upgrade in Nifty EPS for FY20/21 each to INR603/720 v/s existing projections of INR560/667. EPS growth will stand at 25%/19% v/s existing 16%/19% for FY20/21. Out of the 50 Nifty companies, 21 will see an EPS revision upwards of 10% and 9 companies between 5-10%, ceteris paribus. Private Banks, Auto and Consumers are the biggest beneficiaries, while IT will not see any incremental positives from these announcements. Large Caps ICICI BANK, SBI, L&T, ULTRATECH, TITAN, EICHER MOTORS, ICICI PRU LIFE, BHARTI AIRTEL. Mid Caps : Indian Hotels, Federal Bank, MMFS, Ashok Leyland, PI Industries, ABFRL, Trent, JK Cement, Oberoi Realty. Expect beaten down small cap to see a big move.
Global markets are remain weak on account of geo-political tension between US-Iran and concern of US-China trade deal. However, it has time to come shopping on Indian equity after FM unexpected to cut corporate tax rate.