More needs to be done

Update on the Indian market:

On Tuesday, NIFTY lost its winning streak. It closed -0.10% lower. Among sectoral indices NIFTY PSU Banks (-2.34%), NIFTY BANK (-1.25%), NIFTY Financial services (-1.9%), NIFTY Auto (-0.38%) and NIFTY Metal (-1.63%) closed lower while NIFTY IT (+1.98%), NIFTY Pharma (+0.44%) NIFTY FMCG (+0.62%) ended on a positive note. The biggest gainers were Infosys (+3.88%), Zeel (+3.66%), Tech M (+3.11%) whereas Eicher motors (-3.84%), State Bank of India (-4.06%), JSW steel (-4.19%) ended with high losses.

Excerpts from a panel discussion with R.C. Bhargava, chairman, Maruti Suzuki India Ltd; Pawan Goenka, managing director of Mahindra and Mahindra; and Rajiv Bajaj, managing director of Bajaj Auto Ltd with CNBC TV18.

• Finance Minister in a totally unexpected move reduced corporate tax on Friday. Effective tax rate now stands at 25.17%, inclusive of surcharge and cess. This move will help companies to increase their profitability. FM quoted that it will lead to revenue loss of ₹1.45tn.
• Speaking about further discounts in auto sector, Mr Bhargava (Chairman, Maruti Suzuki) rules out the scope of further price cuts out of the tax savings. He says if we take a look at savings from the tax cut it is about one-fifth or one-sixth of total tax payment.
• Mr Bhargava believes, it is better to pump benefits back in the company in the form of capex, more investments rather than more discounts in an environment where the discounts are at a peak.
• Mr Bhargava says, Manufacturing in India has never grown at a high rate. The tax cuts will make manufacturing industry competitive. Moreover, customers don’t buy during uncertainty. Now that GST overhang is out of the way, we can see people making decisions.
• Mr Bhargava believes, coming October will see much better retail sales than in the previous months.
• Mr Goenka (MD, Mahindra & Mahindra), also praises the corporate tax cut as it will make Indian companies globally competitive.
• He says, a wrong expectation has been coming out in the last two-three days that because of this, auto companies would be able to reduce prices. Tax cut is a stimulus which will help in mid and long term in the form of higher capacity, increase in employment rate.
• On discounts he believes that even if entire benefit is transferred, M&M will be able to reduce vehicle price by about 0.5%, which means on a ₹8 lakh car by about ₹3,000.
• Mr Goenka believes that there is a sentiment boost in the market which was needed in current scenario.
• Mr Rajiv Bajaj (MD, Bajaj Auto) is also of the same opinion that this will benefit in the long run. Talking about its immediate effect on Bajaj Auto, the heavy investment in consumer offers and media spends that they have undertaken in a quarter will be reimbursed because of the lower tax rate.
• Taking about reduction in tax for new entities, he says it might help Bajaj as it is about to sign-up with Triumph. How it turns out is a matter to look at.