Union Budget 2017: Stocks to look out for!

Nutan Gupta

27 Jan 2017

With less than a week left for the Union Budget to be announced, there is a lot of curiosity related to the impact it will have on stocks. The government is likely to announce a reduction in the corporate tax rate, which is a positive sign for companies. Here are five stocks that one can consider investing in ahead of the Union Budget 2017.

Power Grid Corporation of India Limited

Power Grid Corporation of India is a Navratna company which owns and operates ~45% of India’s power transmission network. Revenues of the company are expected to grow 17% YoY in FY17E. The project execution momentum is also expected to sustain beyond FY17E, given a strong pipeline of projects worth Rs. 1.44 lakh crore that are likely to commission over the next 4-5 years. PGCIL is expected to show an earnings growth of 20% over FY16-19.

Budget Impact: The power sector is all set to witness revival on account of government support to increase availability of power. Power Grid Corporation of India will be one of the beneficiaries in the power sector.

DHFL

Dewan Housing Finance Corporation is one of India’s largest housing finance companies. It largely caters to the self-employed segment (40% of total AUM) and has around 353 branches. It generates revenue from interest earnings on housing loans. The company recently issued NCDs worth ~Rs.10,000 crore which are expected to reduce cost of funds by 40bps over FY16-18E. The management plans to channelize these funds to Affordable Housing schemes in Tier II/III cities. The company is likely to witness earnings growth of 24% over FY16-18E.

Budget Impact: The government is expected to increase the tax deduction limit for housing loans which is Rs. 2 lakh currently. This will encourage more people to buy houses. DHFL will be a major beneficiary of this announcement.

NTPC

NTPC, a Maharatna company, is the largest energy conglomerate in India with a capacity of 47,228 MW. NTPC is one of the most efficient players as it has 18% of national capacity but generates 24% of the power consumed. Out of 10 captive coal mines allocated by the Central Government, in phase 1, NTPC is developing 5 coal blocks which are 30-35% of NTPC’s current coal consumption. This will bring down generation cost and improve plant load factor. Company’s superior operational efficiencies (FY16 PLF of 79% against the industry average of 62%) give it a competitive edge. It also benefits from proximity to coal mines and lower fuel costs. The company is expected show a earnings growth of 8% over FY17-19E on account of improved operational performance.

Budget Impact: The government is expected to provide clarity in a positive way on the extension of 80 IA holidays for atleast 2 years. Moreover, domestic energy producers will benefit from government’s focus on energy supply to support the infra-sector.

Hindustan Petroleum Corporation Ltd

HPCL, a Navratna company, is a leading oil and gas refining and marketing company in India. It operates two major refineries producing a wide range of petroleum fuels in Mumbai and Visakhapatnam. The rising crude oil supplies will increase discounts being offered to the refineries, thereby adding to the refining margins. HPCL is expected to be a major beneficiary from this. The company is likely to witness earnings growth of 15-18% through FY17-19.

Budget Impact: The government may cut the excise duty in this budget, given the rise in crude oil prices. HPCL will be a major beneficiary if this announcement comes.

CESC

CESC is a RPG Goenka Group company with presence in generation and distribution of power. CESC has received transmission access for the Noida PPA. It has received transmission access of almost 170 MW which will be operational from April 2017. Lower fuel costs and efficient energy sourcing from Haldia plant will improve the company’s margins. The company is likely to witness 26% earnings growth in the next two years.

Budget Impact: The power sector is all set to witness revival due to government support in order to increase availability of power. CESC will be one of the beneficiaries in this space.

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Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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Union Budget 2017: Stocks to look out for!

Nutan Gupta

27 Jan 2017

With less than a week left for the Union Budget to be announced, there is a lot of curiosity related to the impact it will have on stocks. The government is likely to announce a reduction in the corporate tax rate, which is a positive sign for companies. Here are five stocks that one can consider investing in ahead of the Union Budget 2017.

Power Grid Corporation of India Limited

Power Grid Corporation of India is a Navratna company which owns and operates ~45% of India’s power transmission network. Revenues of the company are expected to grow 17% YoY in FY17E. The project execution momentum is also expected to sustain beyond FY17E, given a strong pipeline of projects worth Rs. 1.44 lakh crore that are likely to commission over the next 4-5 years. PGCIL is expected to show an earnings growth of 20% over FY16-19.

Budget Impact: The power sector is all set to witness revival on account of government support to increase availability of power. Power Grid Corporation of India will be one of the beneficiaries in the power sector.

DHFL

Dewan Housing Finance Corporation is one of India’s largest housing finance companies. It largely caters to the self-employed segment (40% of total AUM) and has around 353 branches. It generates revenue from interest earnings on housing loans. The company recently issued NCDs worth ~Rs.10,000 crore which are expected to reduce cost of funds by 40bps over FY16-18E. The management plans to channelize these funds to Affordable Housing schemes in Tier II/III cities. The company is likely to witness earnings growth of 24% over FY16-18E.

Budget Impact: The government is expected to increase the tax deduction limit for housing loans which is Rs. 2 lakh currently. This will encourage more people to buy houses. DHFL will be a major beneficiary of this announcement.

NTPC

NTPC, a Maharatna company, is the largest energy conglomerate in India with a capacity of 47,228 MW. NTPC is one of the most efficient players as it has 18% of national capacity but generates 24% of the power consumed. Out of 10 captive coal mines allocated by the Central Government, in phase 1, NTPC is developing 5 coal blocks which are 30-35% of NTPC’s current coal consumption. This will bring down generation cost and improve plant load factor. Company’s superior operational efficiencies (FY16 PLF of 79% against the industry average of 62%) give it a competitive edge. It also benefits from proximity to coal mines and lower fuel costs. The company is expected show a earnings growth of 8% over FY17-19E on account of improved operational performance.

Budget Impact: The government is expected to provide clarity in a positive way on the extension of 80 IA holidays for atleast 2 years. Moreover, domestic energy producers will benefit from government’s focus on energy supply to support the infra-sector.

Hindustan Petroleum Corporation Ltd

HPCL, a Navratna company, is a leading oil and gas refining and marketing company in India. It operates two major refineries producing a wide range of petroleum fuels in Mumbai and Visakhapatnam. The rising crude oil supplies will increase discounts being offered to the refineries, thereby adding to the refining margins. HPCL is expected to be a major beneficiary from this. The company is likely to witness earnings growth of 15-18% through FY17-19.

Budget Impact: The government may cut the excise duty in this budget, given the rise in crude oil prices. HPCL will be a major beneficiary if this announcement comes.

CESC

CESC is a RPG Goenka Group company with presence in generation and distribution of power. CESC has received transmission access for the Noida PPA. It has received transmission access of almost 170 MW which will be operational from April 2017. Lower fuel costs and efficient energy sourcing from Haldia plant will improve the company’s margins. The company is likely to witness 26% earnings growth in the next two years.

Budget Impact: The power sector is all set to witness revival due to government support in order to increase availability of power. CESC will be one of the beneficiaries in this space.

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