Lots of regulations are still banned in India, ranging from the complexities of the tax system to the sheer number of import duties. Yet in the last three or more years some decent changes may begin to bear fruit. These include a reduction in the corporate-tax rate and a pledge to, ultimately, end the government’s habit of hitting companies with retroactive tax bills. Financial incentives for manufacturers may also encourage small firms, which have benefited from a bullish mood, as have large firms. Overall, Morgan Stanley’s Rhythm Desai, a bank, seems to have started a new earnings cycle. He predicts an annual profit growth of 24% over the next three years.
Big IT consultants, such as Tata Consultancy Services and Infosys, have done well in the boom. In the years before the epidemic, investors were cold on their growth prospects. Covid-induced digitization, however, has rekindled their interest. Shares of the two companies more than doubled between March 2020 and December last year (although they fell slightly from their peak).
Interestingly, the recent pick-up in the Sensex has been mass-based, said Credit Suisse, a bank’s Nilkant Mishra, as it is showing strong returns through one industry after another. Home builders, for example, have been boosted by increasing demand from buyers and accelerating credit growth. As a result, share prices of cement and machinery manufacturers have risen.
Garment companies’ share prices with cotton and yarn producers have risen as well as those of chemical companies. The idea is that these could benefit not only from general optimism about the domestic economy, but also from its high-cost leanings and increasingly geopolitically divisive, east-facing neighboring production. 3
