CLSA gives thumbs up to GST, PSU bank recap; RIL, SBI, ITC among top picks

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Published: November 22, 2017 5:57:04 PM

CLSA joined the bandwagon of global research firms cheering India’s structural reforms, and says that the benefits of GST are moderately visible through early signs.

CLSA says “Investors are turning positive in India, as they believe that the worst is over in terms of poor corporate earnings.” (Image: Reuters)

CLSA joined the bandwagon of global research firms cheering India’s structural reforms, and says that the benefits of GST are moderately visible through early signs. In its latest India strategy note, the global firm noted, “After the implementation of goods and services tax (GST) from July 1, companies highlighted the shift from the unorganised space to the organised space within their industry.” The research house said that investors like government’s pro-growth stance in public sector banks’ recapitalisation plan of Rs 2.11 lakh crore and are positive on mild fiscal relaxation through tax cuts. “Investors are turning positive in India, as they believe that the worst is over in terms of poor corporate earnings,” CLSA said.

In fact many analysts have pointed out that the second quarter earnings have indeed been better than expected. Taking stock of earnings reported by India Inc in the quarter gone by, research firm Motilal Oswal says that it was a ‘breath of fresh air,’ as most of the corporates have beaten street estimates. In an interview to CNBC TV18, Gautam Duggad of Motilal Oswal Securities said, “The earnings have come as breath of fresh air and one can look forward to better earnings due to base effect and disruptions behind us.”

Even though the benefits from GST are visible, CLSA says that improvements in capital expenditure activity are not expected just as yet. In the report CLSA also shared its top picks as  ICICI Bank, SBI, M&M, ITC, Lupin, Reliance Industries, Bharti Airtel and Jubilant Foodworks.

On the back of reforms such as Saubhagya, the firm is also keenly watching developments in the housing sector. In a recent interview to ET Now, Mahesh Nandurkar, India India Strategist, CLSA said, “One of the themes that we have been very positive on for some time now is the housing construction segment. What we sort of say is that over the last five years, the housing market has not really done anything. Both in volume terms and in value terms, the market has stayed flat and we feel that the housing sector is now at the tipping point and the improvement should be likely going forward because of two factors — the primary factor is the housing affordability measured as mortgaged payments to household income has gone down to an all-time low.”

He believes that the government initiatives will spur growth in the sector. “There is the government effort to kickstart the housing sector. Both put together makes us very bullish and that obviously has the positive impact on a whole host of sectors. Housing finance is the obvious one,” he told the channel.

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