The stock market has already discounted a strong earnings growth in 2010. Valuations look rich. The investor must look for opportunities in islands of excellence
Akash Prakash, Fund Manager and Chief Executive Officer, Amansa Capital Pte. Ltd.
HIS CALL: No room for P/E expansion. Midcaps will deliver outsized performance.
His big investment idea: Watch for tax and policy changes from the government in 2010; they will spout investment opportunities.
One clear implication of the new direct tax code, in whichever form it gets implemented, is a narrowing of the tax differential for companies in India. Anyone paying tax at or near the peak rate will benefit hugely, while anyone paying MAT, or relying on area-based benefits, will lose out. Investors should bear this in mind. The desire to make capital investment a basis for taxation in the new direct tax code (through a proposed tax on gross block) should further sharpen investor focus on the underlying ROIC of a business, as low-return businesses will have to pay a disproportionate share of profits as tax.
(This story appears in the 22 January, 2010 issue of Forbes India. To visit our Archives, click here.)