GST Distorted Rating ... and Creating Opportunities

  Mars, 27 June 2017

In this issue:
»Fly home domestic airlines in the sky
»Reserve Bank of India asks banks to keep all the provisions for all matters referred to in the bankruptcy process
»Market Update
" even more...

 They say that GST has become the third most difficult puzzle to crack. The top two are still going to the Duckworth Lewis system, the mood of your spouse and obviously.It's just one of hundreds of wisecracks going around GST. It is not difficult to bring a business negotiation these days and to GST. This is also a common topic on social media. There is also no demonetisation frenzy that can be generated by the upcoming tax reform spell.And not without reason One scheduled for starting July 1st, the goods and service tax is determined for the revolutionary changes in the way we do our taxes. It is implemented on a comprehensive, multi-pronged, destination based tax per-value promotion. And this will make India, our humungous country, a single market for the first time.Despite its implementation, panic around, even the strictest critics of GST can not refuse their ability long-term benefits. If executed properly, this cash can be set not only for the consumers and the economy, but also for the manufacturers to set barged registers.And if all the financial stakeholders benefit ... Company shareholders can not be far behind - either the argument goes.It has not survived any information that the benchmark indices are currently trading on a premium. A lot of this is nothing to do with the benefits of successful implementation of GST.Ok, a party is not to be a pooper ... but investors get more optimistic at their own risk.Remember 1992's economic reforms? They were in the form of big bang in the form of the upcoming GST if not big. Investors were the reason of being as optimistic as they are now.But did optimism 25 years ago translate into the stock market profit?Well, investors who were in shares in the name of reforms in 1992 were in for a harsh blow. The stock markets remained almost flat for a large part of the next twelve years ... even 50% fall at one point!It is not that 92 reforms have not been successful. They certainly did. They brought all the benefits that were expected of them. But due to the stock markets did not show a big reason ...That's right: Evaluation.Investors had forgotten to ask if they were paying too much. And they were definitely. There were levels of evaluation in the 1990s and most of them are included so far. Even if the economy grew and India Inc's earnings went up, it could not be distributed in the stock markets for twelve long years.There are nowhere close to those crazy valuations in the stock markets. But there is always a lot of enthusiasm and payment for a stock is very high risk of investors.All things considered, I am paying for its underlying value in relation to this stock too much: whether it be liberalization, a new government, GST, or a great monsoon, you always have to ask all the important questions?In relation to their latest stock pickup, Smart Money Raj team does not seem to like it.Share because close-term GST is closed from its highest level of concerns. In fact, it is one of those rare good quality companies whose share price is below and not because of GST. Our Smart Money Raj team is not complaining.The team understands as one of the best entry points in the stock packaging industry thanks to a unique long-term future for its unique situation.If you are not a smart money customer or you are, you will also have to invest their long-term internal value on a discount to invest in companies. And never give yourself a premium assessment because of a major big improvement in a company.

 
 Charts of the dayIndia is on a high growth path in the aviation industry. India's domestic air traffic has doubled in the last six years. It is on the back of strong economic growth and low fare airlines emergence. Indian aircraft now set their sights on international traffic. Indian plane is increasingly increasing its market share. Keep in mind that overseas carriers still dominate and dominate international traffic from India is important.


Fly domestic airlines to alien skies  According to the report by the rating agency ICRA, the share of domestic airlines in international traffic of India increased from 30.1% in FY17 to 35.1% in FY14. In the coming years, as part of this government, there is a possibility of increasing the 5/20 rule with the rule 0/20. 5/20 rule mandate that airlines need to fly domestic for at least 5 years and have 20 planes. The new 0/20 rule eliminates the need for five years, but still the carriers will need to demonstrate the fleet of 20 planes.Why are air carriers focusing on international traffic? Indian carriers are chasing international routes to increase their revenue and profit margins. Traditionally giving international routes more profits for airlinesBut does this mean international routes are more profitable than domestic? Not necessarily If you see recent results of air carriers such as Jet Airways and Indigo, the international segment was worse than domestic trade in FY17. This is due to high competition, weak international market (especially Gulf region) and high cost.Keep in mind that some industries have relatively sluggish economics compared to others. And investors must do it well, especially in the case of aviation. Investors need to understand the mobility of the industry before buying aviation stocks.Reserve Bank of India (RBI) has directed banks to keep high provisions against all cases sent for bankruptcy proceedings. The central bank said to the banks to set aside 50% on one side of the loan amount as a likely loss for all cases referred to the National Company Law Tribunal (NCLT).The Reserve Bank also said that the provision should be 100% in those cases that fail to resolve under the bankruptcy process and instead are forced to liquidate.Banks are sent to NCLT under the Bankruptcy and Bankruptcy Code, 2016 (IBC), 12 will have to make higher provisioning on large loans. Although banks have already made some provisions, additional provisions will be made in the bottom line of the banks in the coming quarter.Continuous selling in the Indian stock markets was doing little business while writing on the back of pressure, mainly in auto and bank sectors. At the time of writing, the BSE Sensex was trading below 91 points. Both mid-caps and small-cap indices are trading down 0.94% and 1.09% respectively.Day Investment Mantra"We are not to be smarter than the rest. We have to be more disciplined than the rest."