Boom!as FM Busts Corporate Tax!~Wow!How!Now!?

Released today under my authorship in the SCRIP STANDPOINT Module of Jeena Scriptech Alpha Advisors Pvt Ltd  

“How’s the Josh !?”

Boom!as FM Busts Corporate Tax!~Wow!How!Now!?

The effect of Fun & Excitement peaks when the cause is least expected

Market Sentiment has reversed dramatically & instantaneously !  

BSE & NSE  has seen the Sensex & Nifty created historic surges moving respectively 5.32% & 1921 points up to 38015 & 569 points to 11274 on Friday,September 20,2019 & even more by 2.83% to 39090 & 11600 on Monday ,September 23,2019 to aggregate a surge of 8.3% in just two trading days with Total Market Capitalisation zooming up in just these two trading days by Rs 10,45,700 crs or nearly US $ 150 Billion  to  Rs 148,87,830 crs or near US $ 2.1 Trillion ,thus regaining US $ 2 Trillion Capitalisation quickly ! 

Date Sensex Close Up/(Down)  Points, % Approx Total Market Cap

(Rs Crs)

Total Market Cap Up (Down )

Rs Crs, %

Friday ,September 13,2019

A Week Before

37385 1,42,42,950
Thursday,September 19,2019

Day before Tax Rate  Game Changing Significant Slash Announcement

 

36093 (1292), – 3.46 1,38,42,130 (4,00,820),  -2.8
Friday,September 20,2019

Morning of  FM’s Tax Rate  Game Changing Significant Slash Announcement

38015 1922, 5.32 % 1,45,34,237 6,92,107,   5
Monday,September 23,2019

On Second Trading Day after  FM’s Tax Rate  Game Changing Significant Slash Announcement

39090 1075, 2.83 %

&

2997 in two days, 8.3%

1,48,87,830 3,53,593,   2.43

&

10,45,700,   7.56 

Wow ! How !  Now ! ?

It took a Government Sacrifice of  Rs 1,45,000 crs or US $ 20 Billion in Corporate Tax Revenues to create a 7x sacrifice surge in Market Cap of US $ 150 Billion in just two trading days !

It’s like the Government conceding to the Corporate Sector ” Hey Guys ! we’re transferring our Revenues to you as you’ll can put it to more productive use by funding an Investment Capex Cycle to stimulate more growth for better returns than we can through increased Government Spending “

What is clearly a Market Valuation Re-Rating Move,on the morning of Friday,September 19,2019 our FM Mrs Nirmala Sitharaman announced,what should be seen as a forced measure, a Tax Bonanza for Corporates busting the Tax Rate from an effective high of 34.94% for most to an effective 25.168% with no requirement for those who opt for this rate,  to pay the Minimum Alternate Tax which too was slashed to an effective 17% from  the current 18.5%.Another major tax incentive will be a Tax rate of just 15% for manufacturing companies incorporated after October 1,2019  & who commence manufacturing by March end 2023

Such Tax Rate Cuts & Incentives  announcements should have been part of the budget in early July.If one recalls since the NDA came to power in 2014,it’s always been their stated intent to reduce the Corporate Tax Rates gradually to 25%.Economic slowdown is a catalyst to this ‘one shot’ reduction now & that’s why it can be viewed as a forced measure

It’s a ‘No Brainer’ that Markets would instantly turn euphoric as back of envelopes calculations see the Nifty 50 Companies,whose aggregate FY 19 PAT was Rs 370000 crs , benefit by a clean Rs 27000 crs or US $ 3.8 billion in FY 20 on this Tax Rate reduction.Factor in Earnings Growth before Tax & the benefit is even higher  read more

Looooooooong Full House Saturday Equity Mumbai Workshop Sept 14 2019

It was a looooooooong,should have held it over two days,  Full House Equity Workshop in Mumbai on Saturday,September 14,2019 with a whole spectrum of smart participants that made for really invigorating interaction ~they came from Mumbai,Gurgaon & Pune ~ from young upwardly mobile grads & post grads from top ranked Management Institutes in India,UK (London) & USA(Harvard) to ‘ well tuned in’ professionals from the IT ,Consultancy,Broking,Corporate & Banking Sectors to veteran high networth investors . We commenced at 9.30 am & concluded well beyond 7.30 pm ~ 🙂 should have arranged dinner too

Thank you Guys !

Here are a few candid clicks from the Workshop :

The Coverage was expansive & the Interaction from Participants very intelligent & which opened out many threads that we examined with anecdotal support . When analysing a company ,they asked what is “Non Negotiable” &  “How to have Foresight as on Hindsight we are always right”

Really a lot was covered ,some of which is below  :

  • Macros through :
  1. Examining the Equity Table’s four legs of Valuation,Liquidity,Momentum & Sentiment & the Impact of FPI Flows ~ when Valuation,which should be the strongest leg,sometimes takes a back seat as Liquidity or even a lack of it drives the momentum & sentiment
  2.  Not getting Seduced by any Bounce at  Friday closing Sensex 37385 & Nifty 11076 Levels as Caution is strongly indicated by domestic & overseas economy & geo-political headwinds
  3. Negative Interest Rates Era vs the Magic of Compounding in such meltdowns
  4. Sensex & Earnings & Market Cap & low GDP growth Dynamics on Levels & Valuations ~ Past,Present & Forward & why downside risk remains wide open while the upside appears capped for now ~ we referred to 1991/92 abnormally high Sensex PE pre Harshad Mehta Scam exposure & the High PE in 2000 with Ketan Parekh was in action & where the markets were clearing running ahead of fundamentals by huge margins~ we referred to the Sensex PE of just 6 in the late 1980s when VP Singh was the PM 1988~ we covered Mkt Cap/GDP Highs pre Lehman collapse in 2007/8 & the levels now
  5. Fx Reserves  & Exchange Rate Risk &  the Risk of increasing Sovereign Debt as planned by Government ~ How our Rupee has always had a South trajectory,except when it soared from Rs 49 to the US $ to Rs 39 to the US $ creating havoc especially in the Diamond Sector
  6. Why Inversely co-related Gold & US $ are moving up together instead
  7. Turm-Oil & Impact on Fiscal Deficit & Rupee  like last happened in 2007/8( On Saturday at the workshop we were not yet clued in to the Drone Attack on the Oil Refinery in Saudi Arabia that saw Oil Prices dangerously soar 20% in spot) ~ India is hugely dependent on Oil Imports
  8. Interest & Inflation rates
  9. Trump ~ Not sure if he’s a macro or micro factor !
  • Micros through many companies  & sector dynamics covering :
  1. Checklist on how to Smartly & Effectively & thus Quickly Read a voluminous Annual Report
  2. Our Five Steps for Evaluating a Company for Investment
  3. Impact on the Financial Statements in Scenarios like Buy Back,Rights Issues,Fictitious Sales,RBI issuing a divergence on Provisioning for NPAs,non linear jump in Sales Realisations,5 G Spectrum Fees,Permanent Diminution in Investments,Monetising Assets & Depreciation of the Rupee
  4. Quick Brief on Absolute & Relative Valuation & how to prepare a quick Valuation Grid from the Annual Report, Market Price Trends & Shareholding
  5. Why Liquidity more than Profitability is the ‘Circle of Life’  for a Company as viewed through the lens of the Cash Flow Statement dervived from the Balance Sheet & Profit & Loss Ac & that distinguishes operating,financing & investing flows
  6. Corporate Governance Issues on inadequate Disclosure or Non Disclosure, Incorrect & questionable Accounting Treatment & Lack of Transparency &  irresponsible (deliberate?)  Management utterances  that give a leg to Insider Trading & huge Profits through  Derivatives Play
  7. Courage & Conviction Promoter or Institutional recent Buying in Vodafone,Yes Bank,I B Real Estate & Tata Motors & seeing more wealth destruction since in these   
  8. Basis for Disclaimer of Opinion by the Auditor of Reliance Infrastructure & what holds out some hope
  9. Intangibles,Investments & Impairments
  10. Reliance Industries’s Enterprise Value,Revenue Segments Potential,Spin offs of the Jio Telecom Infra into two trusts, Aramco’s 20% stake being negotiated in the Refining,Petroleum Retailing & Petrochemicals Business that should lead to further demerger & reviving & scaling the Gas Exploration Operations
  11. How Defaults & Corporate Governance Issues decimated into or near oblivion Eros,Cox & Kings,ManPasand,Tree House Education,Satyam,Jet Airways,Kingfisher & Talwalkars & is there any hope of operational & share price recovery with Asset values holding out some hope in a few ~ How Clearly the Statutory Auditors & Credit Rating Agencies were negligent or intentionally turned a blind eye in many cases
  12. Huge Potential Outlay of the ‘Nal sey Jal’ Scheme of the Government & the new Jal Shakti Ministry focus that should benefit many companies if the implementation & execution is as noteworthy as the intent
  13. How IndAs 115 continues to affect Bombay Dyeing
  14. How Exchanges continue to accept outright untrue or tepid clarifications from Companies
  15. Reference to Investment Gurus & Living Legends Warren Buffett & Peter Lynch Approaches & Success
  16.  Coverage of a few sectors like Defence, Hydrocarbons,Broking,Telecom,Real Estate,NBFCs,Banks & Automobiles & Disruption that’s in play in many
  17. Consolidation & Capitalisation of PSU Banks & the controversial Acquisition of Laxmi Vilas Bank by I B Housing Finance pending RBI approval
  18. Common Investor Mistakes

The next Equity Workshop is scheduled  pre-Diwali for Saturday ,October 19,2019 & will be announced soon on www.jsalphaa.com & social media

Touched by some warm & constructive feedback from participants :

  • thanks for a lovely interactive session…”
  • “enjoyed your session yday”
  • “it was great to meet again & reskill to be better prepared for opportunities which would arise”
  • “Thanks for being the Enabler,the last few days have been very encouraging”
  • “Cover the Scenarios Exercise more with Investor focus than just on Accounting Impact & take in a few Annual Reports before Lunch”  

😆 & I swear I did not pay for these ones !

  • ” You are very good at what you do,comes naturally to you,with a vastness of the subject to cover you did justice to cover the best you could with your insights and experience of all the treasures of knowledge,you are an encyclopedia of the subject with case studies,which is the best way of teaching, sharing & learning according to me,the various industries that you know of,the processes & the products,the promoters & the pitfalls,the auditors & the audited,you can understand in the readings the stated & the unstated,intention & intended,you truly personify_the integration of intellect with instinct_”   
  • “Whoever missed this one, missed learning a radical way to look at balance sheets. Very practically in a few minutes you can strip away the padding and bullshit that promoters hide their sins behind. If the stock market’s motto or rather rider has always been caveat emptor or buyer beware, Gaurav’s lessons in Analysis would ensure that a “fool and his money are not soon parted” for when emotions like fear and greed coupled with ignorance seize us even the wisest are prone to behave like fools. Especially the wisest!”
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