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MOSL: Morning India (23/September/19): 1. India Strategy (Big Fiscal Bazooka; sharp reduction in corporate tax rates); 2. GST; 3. Oil & Gas; 4. Expert Speak

MOrning India (23/September/19): 1. India Strategy (Big Fiscal Bazooka; sharp reduction in corporate tax rates); 2. GST; 3. Oil & Gas; 4. Expert Speak

 

Today’s top research theme

India Strategy: Big Fiscal Bazooka; sharp reduction in corporate tax rates

• After a series of baby steps to boost growth over the past month, the Indian government took a giant leap on 20th Sep'19 by unveiling a big-bang fiscal stimulus in the form of a sharp reduction in the corporate tax rate from 30% to 22% and a fillip for investments in manufacturing.
• At USD20b impact, the cut in tax rates provides a sizable boost to the animal spirits of corporate India with potential to drive investment, sentiment and in turn consumption. Last time, the corporate tax rates were cut by such a magnitude was in the famous 'Dream Budget' of 1997.
• With this step, the government has done its part for the time being, in our view. Now the ball is in the court of Corporates as to how they utilize this stimulus to drive investments and consumption.
• Ceteris paribus, our detailed company level workings suggest that the 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.

Piping hot news

Expect no slump in govt spends: Finance minister Nirmala Sitharaman

Finance minister Nirmala Sitharaman has ruled out any cutback in expenditure, allaying apprehensions sparked by hefty corporate tax rate cuts, and said the government would instead push spending as the country looks to stave off the economic slowdown that pulled down growth in the first quarter of this financial year to a six-year low.