Nobody wants to buy a stock at expensive valuation. Yet, these are times, when high quality comes at a relatively higher price. So, the challenge is to identify stocks that may look expensive, but are showing steady growth, have good corporate governance standards and generate strong free cash flow. As BNP's Manishi Raychaudhuri puts it, no prudent investor can ignore valuations. The key to alpha generation is to identify growth stocks that are cash generative and can offer excess return over time.
STREET PULSE: Where we stand Nifty futures on the Singapore Exchange traded 29 points lower at 7am (IST), signalling weakness ahead on Dalal Street. Asian stocks fell with US futures and bond yields after Apple said quarterly sales would miss forecasts, illustrating the blow to corporate earnings and economic growth from the deadly coronavirus.
HERE'S WHAT TO WATCH  | Equities in Tokyo and Seoul led Asian benchmarks lower. Sydney and Shanghai saw more modest declines. |
| US markets were shut for trade overnight on account of George Washington's Birthday. |
| Oil prices fell on Tuesday on lingering concerns over the economic impact of the coronavirus outbreak in China and its effect on oil demand, tracking losses in financial markets. Brent slipped 37 cents to $57.30 a barrel while WTI crude fell 15 cents to $51.90 |
| The rupee settled 5 paise higher at 71.32 against the US dollar on Monday, helped by some moderation in crude prices. However, stronger US dollar kept the rupee's rise in check. |
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SUITORS FOR DHFL… About two-dozen potential buyers, including the Adani Group, KKR, Warburg Pincus and Oaktree Capital, on Monday put in non-binding initial bids to purchase troubled mortgage lender DHFL. While the Adani Group, Oaktree Capital, ARCIL, KKR India and Welspun Group bid to buy the entire business, Edelweiss, Kotak Mahindra Bank-led Phoenix ARC and distressed asset funds Varde Partners and SC Lowy have shown interest to buy specific portfolios. The DHFL administrator sought bids in two categories. Under the first option, companies bid to buy the entire business of DHFL while in the second category, they could choose from the retail, wholesale and slumrehabilitation portfolios.
Read More NCDs BEAT BANK FDs … The difference between returns from bank fixed deposits and lower-rated non-convertible debentures (NCDs) has hit the highest level in a decade. Finance companies such as Shriram Transport Finance, IFCI and IIFL Finance, which do not enjoy top-notch credit rating, could deliver 4-6% higher returns than the highest interest rate offered by a SBI fixed deposit. Financial planners said the disparity in the rates makes a case for investment in NCDs of select finance companies.
Read More MNCs SEEK TO DUCK DDT HIT… MNCs in India have reached out to their tax advisers seeking to know the exact tax payable on dividends under existing tax treaties and if the status of most favoured nation would lead to additional benefits. Several persons in the know said the MNCs are analysing total tax on dividends with respect to the tax treaties and the most favoured nation status of the source country. Many would now fall back on the tax treaties and could be looking to postpone their dividend payouts till April this year.
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FRESH BLOW FOR VODA IDEA… The Supreme Court on Monday rejected Vodafone Idea's appeal to direct the telecom department not to invoke its bank guarantees for recovering adjusted gross revenue (AGR)-related dues, leaving the beleaguered telco on the brink of a possible collapse. "...if the bank guarantees get encashed tomorrow, then the company will have to close," Vodafone Idea's counsel Mukul Rohatgi told a TV channel. Officials said the DoT is seeking the law ministry's opinion on whether the bank guarantees can be encashed before the next date of hearing in the SC to recover part of the dues.
Read More MFs SIDEPOCKET VODA… Mutual funds invested in the debt of Vodafone Idea have begun segregating those investments into a separate portfolio after the company's creditworthiness was downgraded in light of the stressed finances. UTI Mutual Fund and Nippon India MF Monday decided to create a segregated portfolio, following in the footsteps of Franklin Templeton Mutual Fund, which had already segregated the investments last month. The telco must pay the government Rs 53,000 crore in dues, and analysts say its net debt at Rs 1.03 lakh crore at the end of the December quarter is unsustainable.
Read More INDIA OUTLOOK CUT… Ratings agency Moody's has slashed its 2020 growth projection for India to 5.4% from 6.6% forecast earlier on the back of slower recovery, citing largely domestic factors and cautioning that global economy will be adversely impacted by the novel coronavirus outbreak. It has also revised downward the GDP growth forecast for China to 5.2% in 2020, warning severe downside risks to the global economy if the coronavirus grows to pandemic proportions. In 2021, India is forecast to grow 5.8% against 6.7% estimated earlier.
Read More Meanwhile... ESOP CONCESSIONS… CBDT has shot down a proposal by the DPIIT to extend tax concessions on employee stock options, announced in the Union Budget, to all registered startups. Instead, it is mulling changes to the Inter-ministerial Board framework that grants exemptions to startups under Section 80-IAC, ET reported quoting sources. The move will somewhat broaden the scope of startups that can benefit from Esop concessions. Currently only a few hundred startups in the country are exempt under 80-IAC.
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