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Market Live: Nifty above 11,600, Sensex gains 1,200 pts; Nifty bank up 5%, ITC up 7% – Moneycontrol.com


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CLSA India strategy
Lower corporate tax rate imply a 7%-8% EPS upgrade for Nifty 
Winners would be capex plays like ICICI, Axis, L&T & Adani Ports
Reduce IT to Underweight & add Adani Ports to model portfolio
Best way to play improved capex outlook is via ICICI, Axis, SBI, L&T & Adani Ports
Reduce our weight in IT by 3 pts & add to Adani Ports & ICICI
Cos with large tax benefits are HDFC Bank, Kotak Bank, ITC, Colgate, Britannia
Cos with large tax benefits are ONGC, BPCL, ICICI Lombard, L&T
Cos with large tax benefits are Bajaj Auto, Hero, Eicher, Zee
Cos with large tax benefits are Bharat Forge & Pidilite 
Other top picks are RIL, HDFC, ICICI Pru, Bharti Airtel, Sun Pharma & HCL Tech

CLSA on Consumer
Tax cuts drive FY20 EPS estimates into the double digits 
Colgate, Britannia, ITC & Jubilant Food are now our top 12-month picks.
Cos that benefit include Colgate, Britannia, Jubilant Food, USL, Asian Paints
Cos that benefit include Nestle, HUL & Kansai Nerolac
Lift our ratings on USL, Asian Paints, Britannia & Kansai
Downgrade Titan & Nestle post the recent run-up

Credit Suisse on Financials
Tax rate reductions will boost bank earnings by 8-12% in FY21
Tax rate cut raises RoEs by 100-200 bps & lead to multiple re-rating
Continue to prefer well-capitalised banks
Remain cautious on PSU banks & NBFCs
HFCs & insurance companies will see limited benefit

Credit Suisse on Consumer Sector
Effective tax for the highest slab including surcharges goes down from 35% to 25%
Upgrade earnings of most consumer stocks by 10-18%
Impact is much lower for companies such as Marico, Dabur, Emami, GCPL & Titan

Credit Suisse on BPCL
Maintain underperform, raise target to Rs 320 from Rs 300 per share
Beneficiary of corporate tax rate cut
High capex cycle still leading to debt increase
Current effective tax rate is 35%, which will reduce to 25%
Raise FY21 & FY22 EPS by 12% & increase in FY20 EPS higher at 32%

Credit Suisse on HPCL
Maintain underperform, target raised to Rs 260 from Rs 250 per share
Raise EPS estimates by 12-18% for FY20-22
Current effective tax rate is 35%, which will reduce to 25% 
This will result in higher cash flows & partly reduce debt requirement 

Credit Suisse on IOC
Maintain underperform, target raised to Rs 120 from Rs 115 per share
Increase EPS estimates by 11-16% for FY20-22 
View is cautious on high supply pressure in refining & heavy capex cycle 

Credit Suisse on Metropolis
Maintain neutral, target raised to Rs 1,150 from Rs 1,000 per share
FY20/ FY21/FY22 EPS increase by 10%/12%/12%
See 18% EBITDA CAGR over FY19-FY22
Neutral rating is due to low entry barrier in the diagnostic industry

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Brokerages View: Source – CNBC-TV18:

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Kotak Equities on India Strategy
Corp tax rate cut is a huge boost to private sector investment
Tax rate cut boost to particularly domestic manufacturing
Autos, banks, cons staples & global commodity sectors to see large earnings upgrades 
Electric Utilities, IT & Pharma Sectors will see little or no earnings changes
Our FY20 EPS estimate for Nifty 50 Index will increase by 10% from previous estimates 
Push for fresh investment in manufacturing; land & labour reforms equally critical
Envisage acceleration in investment in manufacturing
Expect a rise in fiscal deficit as government has not indicated any expenditure cuts
Expect profits of Nifty 50 index to grow 25% for FY20 

Macquarie on India Strategy
Government brings the economy back in clear focus with USD 20 billion in corporate tax cuts
70 bps of fiscal deficit slippage is tolerable
Measures are targeted at accelerating corporate spending 
Would not rule out further reforms in areas like FDI, land, labour
Recommend adding domestic cyclicals like banks, industrials, autos 
Remaining underweight on consumers
Top large cap picks will be HDFC Bank, L&T, Maruti 
Nifty FY19 adjustment tax rate was 30% & hence there is 8% earnings benefit
Big boost to capex cycle by cutting tax on new companies to 17%
In the short term, insurers, IT & Utilities do not benefit from tax cuts

BofAML on India Strategy
Nifty 1 year forward EPS estimates for FY20 could see upgrades of 7%
Reduction in tax will likely increase cash flow for cos 
Reduction in tax will improve IRR of new investments
Capex May only pick up with some lag depending on the need for new capacity
Government could look for expenditure reductions to fund this stimulus
An expansion of fiscal deficit seems likely
Prefer financials, which could benefit from improving corp investment cycle

Nomura 
Raise March 2020 Nifty target to 12,545

UBS
Raise Nifty June 2020 target to 12,300

JPMorgan
Nifty March 2020 target at 12,200 

Goldman Sachs
Raise Nifty 50 target to 13,000 From 12,500 

Morgan Stanley on India Strategy
Green shoots in the offing, raise index target
Corporate tax cuts create room for improved earnings growth
Raise earnings growth estimates for Sensex to 25% in FY20 & 23% in FY21 
Raise Sensex target to 45,000 by June 2020

Citi on India Strategy
Slashing of corporate tax could reset coverage earnings up by as much as 8-9%
Ambitious scope of the reforms could also act as a sentiment booster to equities
Markets will likely expect more big ticket announcements going forward
Raise March 2020 Sensex target to 40,500 from 39,000 

Jefferies India Strategy
Biggest beneficiaries of corporate tax cut will be Asian Paints, Avenue Supermart, Britannia
Biggest beneficiaries of corporate tax cut will be Jubilant Food, United Spirits, Colgate 
Potential earnings boost of 11-14% for cos like Asian paints, Britannia 
Potential earnings boost of 11-14% for cos like Avenue Super & Colgate 
Dabur, Marico & GCPL should see negligible impact given already lower tax rate 
No increase in Cess in Cigarettes, a positive for ITC 

Credit Suisse on India Strategy
Sharp cut to the corporate tax rate is aimed to make India globally competitive
Tax cut significantly boosts medium term investment potential 
While it improves sentiment, it doesn’t help revive near-term eco momentum
Markets to be choppy, as weak earnings meet structural changes
Sep 2019 results may have bleak commentary despite good earnings growth 
Remain underweight on consumption & overweight financials 
Lower taxes help ICICI, IndusInd, HDFC Bank & L&T

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CLSA India strategy
Lower corporate tax rate imply a 7%-8% EPS upgrade for Nifty 
Winners would be capex plays like ICICI, Axis, L&T & Adani Ports
Reduce IT to Underweight & add Adani Ports to model portfolio
Best way to play improved capex outlook is via ICICI, Axis, SBI, L&T & Adani Ports
Reduce our weight in IT by 3 pts & add to Adani Ports & ICICI
Cos with large tax benefits are HDFC Bank, Kotak Bank, ITC, Colgate, Britannia
Cos with large tax benefits are ONGC, BPCL, ICICI Lombard, L&T
Cos with large tax benefits are Bajaj Auto, Hero, Eicher, Zee
Cos with large tax benefits are Bharat Forge & Pidilite 
Other top picks are RIL, HDFC, ICICI Pru, Bharti Airtel, Sun Pharma & HCL Tech

CLSA on Consumer
Tax cuts drive FY20 EPS estimates into the double digits 
Colgate, Britannia, ITC & Jubilant Food are now our top 12-month picks.
Cos that benefit include Colgate, Britannia, Jubilant Food, USL, Asian Paints
Cos that benefit include Nestle, HUL & Kansai Nerolac
Lift our ratings on USL, Asian Paints, Britannia & Kansai
Downgrade Titan & Nestle post the recent run-up

Credit Suisse on Financials
Tax rate reductions will boost bank earnings by 8-12% in FY21
Tax rate cut raises RoEs by 100-200 bps & lead to multiple re-rating
Continue to prefer well-capitalised banks
Remain cautious on PSU banks & NBFCs
HFCs & insurance companies will see limited benefit

Credit Suisse on Consumer Sector
Effective tax for the highest slab including surcharges goes down from 35% to 25%
Upgrade earnings of most consumer stocks by 10-18%
Impact is much lower for companies such as Marico, Dabur, Emami, GCPL & Titan

Credit Suisse on BPCL
Maintain underperform, raise target to Rs 320 from Rs 300 per share
Beneficiary of corporate tax rate cut
High capex cycle still leading to debt increase
Current effective tax rate is 35%, which will reduce to 25%
Raise FY21 & FY22 EPS by 12% & increase in FY20 EPS higher at 32%

Credit Suisse on HPCL
Maintain underperform, target raised to Rs 260 from Rs 250 per share
Raise EPS estimates by 12-18% for FY20-22
Current effective tax rate is 35%, which will reduce to 25% 
This will result in higher cash flows & partly reduce debt requirement 

Credit Suisse on IOC
Maintain underperform, target raised to Rs 120 from Rs 115 per share
Increase EPS estimates by 11-16% for FY20-22 
View is cautious on high supply pressure in refining & heavy capex cycle 

Credit Suisse on Metropolis
Maintain neutral, target raised to Rs 1,150 from Rs 1,000 per share
FY20/ FY21/FY22 EPS increase by 10%/12%/12%
See 18% EBITDA CAGR over FY19-FY22
Neutral rating is due to low entry barrier in the diagnostic industry





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