
With fear of losing capital and dampened sentiments towards broader markets, nobody wish to invest in small cap stocks. We have observed a lot of hopelessness towards broader market as Investors who started investing in equities during 2017 and 2018 are not willing to invest in this space due to pain of high negative returns in their portfolio and negative sentiments towards broader markets.
Once broader market start factoring all these negatives, the focus will shift towards individual company's earnings growth and current valuations which will drive stock prices up in coming quarters.
Greed which was seen in broader market (small & mid caps) in the year 2016 and 2017 has turned to fear in 2019. This is the time to do opposite of the herd, its time to be greedy when others are fearful. If you are not investing in equities during these opportune times and taking the back seat, you are making a bigger mistake. Remember, in the long run, you do not make decent returns on your investments by following the herd i.e. when everyone is buying stocks; instead you get handsome returns on our investments by investing in stocks at significantly low prices as no one else is buying, and by selling to them when they come back in herd due to greed in future.
Broader Markets to Outperform post rate cut in Corporate Tax
Last month, FM Nirmala Sitharaman announced a historic reform by reducing tax for Corporate India. Government slashes tax on domestic businesses to one of the lowest rates in Asia, providing a more than USD 20 billion boost to revive economic growth from a six-year low. Effective from April 1, 2019, tax on all domestic companies will be lowered to 22% from a base rate of 30% currently. The effective new rate will be 25.17% including all additional levies.
Earlier, the Govt had reduced effective tax rates on companies with turnover up to 400 crores to 29.12%, now those companies will also be taxed at 25.17%. The new tax structure for new companies formed from 1 Oct 2019 will attract a base tax rate of 15% and effective rate of 17.01%.
India now has amongst the most competitive tax rates in the region. At an effective rate of just over 25 percent inclusive of all levies, businesses in India need not find ways to reduce or evade their tax burden. With more money in hand, Indian firms can choose to further invest in business growth doing capex or can reduce their product prices to boost sales or reward employees giving higher pay cheques. All these moves will eventually have positive economic impact. New manufacturing companies enjoying a tax-friendly entry is definitely a big positive for "Make in India" initiative, an effort to boost productivity-oriented jobs for lower-skilled Indians.
Slashing corporate tax rate will invite big global manufacturing companies to India as well as encourage Indian companies to expand their operations. Indian Government has not only gave a super dose of steroid to revive weak economic growth but also rolled out red carpet for global companies to invest in India, make in India and grow & prosper with India.
Smart investors do not listen to the herd and take a rational approach with their wise & intelligent thinking. As rightly quoted by Warren Buffett - Be Fearful when Others are Greedy and Greedy when Others are Fearful. At this juncture, large caps looks fairly valued or expensive in terms of valuations, however selective small & mid cap companies with robust businesses look very attractive to reasonable and can reward long term investors in big way.
We firmly believe that this is one of the best wealth creating opportunity for long term investors. After crash in stock prices of small & mid caps since Jan 2018, this is one of the opportune time to pick right businesses at very attractive valuations. We must have courage and conviction to pick the right set of companies when there are no takers during downturn instead of chasing stock prices during upturn. If you are a long term investor, its wise to be greedy when others are fearful.
We always advice our readers to take a systematic approach and avoid timing the market while investing in equities with a long term horizon. However, severe corrections in broader market witnessed over last 20 months do not come very often and hence must be considered as buying opportunity to aggressively add on good quality stocks at discounted prices keeping a long term view.
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SARAL GYAN
SUBSCRIPTION SERVICE
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DUSSEHRA - DIWALI OFFER
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PAY ONLINE
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Hidden Gems | Rs. | |
Value Picks | Rs. | |
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Wealth-Builder | Rs. | |
Combo 1: HG + VP + WB + 15% | Rs. | |
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Its important to be a disciplined investor who keep on investing in systematic way irrespective of market conditions and not an emotional investor who usually buy stocks during bull phase when stock prices are moving higher because of greed and sell them in panic during bear phase due to severe fall in stock prices, making mistake of buying high and selling low.
Its our mission to ensure that you reap the best returns on your investment, our objective is not only to grow your investments at a healthy rate but also to protect your capital during market downturns. We also take this as an opportunity to share the returns on investment given by one of our most admired service Hidden Gems during last 9 years.
As we made most of these reports public, you can access read / download our research reports by clicking on the Read / Download link:
1. SAB TV NETWORK >>> Rec. Date: 05 Sep'10 >>> ROI: 890% >>> Read / Download
2. DE NORA >>> Rec. Date: 07 Nov'10 >>> ROI: 180% >>> Read / Download
3. CAMLIN FINE >>> Rec. Date: 27 Mar'11 >>> ROI: 794% >>> Read / Download
6. CERA SANITARY >>> Rec. Date: 24 Dec'11 >>> ROI: 1556% >>> Read / Download
7. INDAG RUBBER >>> Rec. Date: 29 Jan'12 >>> ROI: 120% >>> Read / Download
9. PREMIER EXPLO. >>> Rec. Date: 22 Jul'12 >>> ROI: 142% >>> Read / Download
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24. STYLAM IND. >>> Rec. Date: 08 May'16 >>> ROI: 131% >>> Read / Download
We are confident that we will continue to hunt best Hidden Gems and Value Picks from universe of small & mid caps by doing authentic, in-depth and unbiased research work and support our members to make educated investment decision.
Moreover, under our Wealth-Builder service, we encourage our members to replicate our Wealth-Builder portfolio by investing in selective high quality small and mid cap companies. These companies are reporting 20-30%+ annualized growth and got their due share of re-rating and delivered exceptional returns to our members so far. Since 1st Jan 2013, Nifty has given returns of 94.6%, Sensex returns is 99.3% where as Wealth-Builder portfolio has given returns of 227.4% returns to our members. In case you have not yet started building a portfolio of high quality and fundamentally strong growth stocks for long term wealth creation, please find below the Wealth-Builder portfolio allocation & performance update for your reference.
We believe, investing in Wealth-Builder portfolio with regular portfolio review from our end can help you achieve market beating, very good returns over a longer team and help you take care of yourself and your family needs, which ultimately lead to a healthy and wealthy life after retirement.
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