Macquarie Securities recommends adding shares of the companies catering to domestic consumption and rural demand within India, as those businesses are likely to benefit from a stable tax regime after the implementation of the proposed GST (Goods and Services Tax).
“Portfolio strategy has to be focussed within India, so domestic story is our best (play),” Sandeep Bhatia, Head – Equity, India, Macquarie Securities Group, said on Thursday in an interview to CNBC TV18. “I would… focus primarily on (domestic) consumption. I think passage of GST is also one big trigger,” he added.
Earlier yesterday, the Lok Sabha passed four crucial supplementary Bills, clearing the decks for the July 1 rollout of GST, which will subsume all central and state taxes in favour of a unified tax regime across the country.
Among the large cap names, Bhatia suggests adding ITC shares, as with the implementation of GST the company will get a breather from frequent tax rises. “One large cap name that benefits from GST is ITC,” Bhatia said, adding, “We see year-on-year increases in cigarette taxes. That can be moderated going forward, and that’s one business that will definitely benefit from a stable tax regime.”
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Further, he says consumer durable companies in home improvement and cooling products will also benefit from the new tax regime, propelled by the rising demand due to soaring temperatures. “The news headlines are screaming about a heatwave in the interior of India. So clearly, the temperatures are soaring, which is why most of these AC and fan companies are seeing an uptick in prices,” Bhatia said, adding that these companies would benefit from GST too as there is a portion of tax evasion in most of these electrical companies.
“Home improvement is a very long term story which is going to play in India, and I think the stories there are Crompton Greaves Electricals, Asian Paints and Voltas,” Bhatia said. However, he added that there is a caveat on valuations.
Macquarie is also bullish on the stocks of Glenmark Pharma, he said.
The firm suggests avoiding export-oriented companies’ shares due to uncertainties. “There are significant headwinds coming from exports from combination of political uncertainties coming through and also because of specific regulatory issues that some sectors like Pharma may face,” Bhatia said.