With GST implementation we expect automobile sector to do well. It will favour those automobile companies that manufacture product domestically as domestically manufactured vehicles are likely to benefit from the cost advantage due to lower taxation. GST also likely to remove cascading effect of tax on the cost of goods and services. Along with this, the Pay Commission hike will increase the disposable income in the hand of consumer which is bullish for auto sector.
Another sector which is could be a good play is telecommunication. India is currently the world’s second-largest telecommunications market and has registered strong growth in the past decade and half. The Indian mobile economy is growing rapidly and is expected to contribute substantially to Gross Domestic Product. It is expected that the telecommunication services market will grow by 10-11 per cent year on year. The sector is set to touch $104 billion by 2020.
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After the Government allowed 100 per cent Foreign Direct Investment in online retail of goods and services through the automatic route, The Indian retail industry has emerged as one of the most dynamic and growing industries. Several new players are entering in the sector as Government is able to provide clarity on the existing businesses of e-commerce companies operating in India. The sector accounts for over 10 per cent of the country’s GDP and around 8 per cent of the employment. In the same space India is ranked as fifth-largest global destination in the world.
It is expected that the India’s retail market will nearly double to $1 trillion by 2020 from $600 billion in presently, mainly due to income growth, urbanisation and shifts of consumer style of consumption. As potential is high for India to become the world’s fastest growing e-commerce market, driven by robust investment in the sector and rapid increase in the number of internet users. We believe this will be one sector which will move ahead.
In auto our top recommendation is TVS Motors, the stock is resuming its midterm uptrend after a short-term pullback. A strong support zone is visible in the chart around Rs 300-305 level. The stock is bounced back from its support and started to gaining momentum. Buy with stop loss of Rs 305 on a move above Rs 320.
Another stock to watch is Tata Communication. Overall the stock is in uptrend in its daily chart and is trading above its both short and medium term moving averages of 10 and 50 period, indicating positive trend. After a strong rally the stock entered into a consolidation. We expect the stock to hit Rs 550 level once it break above Rs 500 level.
In retail Aditya Birla Fashion and Retail Limited is looking strong. Investor can see this stock to move till Rs 175 level. The stock is showing good strength in its momentum indicator and with a time horizon of three to six month one could invest at current market price around Rs 150-155.
(The author is CEO, CapitalVia Global Research)