This is not the first time that the markets are correcting or the first time the economy is slowing down. Reverse of sentiments can take place with only one or two positive announcements by the government—like removing the tax surcharge of foreign portfolio investors—to kick start the slowing economy. Meanwhile, Sensex slipped below the 11,000 mark this week as slowdown pangs in the Indian economy added to pain in the stock markets. The focus should now shift from quarterly earnings to the RBI policy next week, with the Street expecting a rate cut in its policy rates. Though a 25 basis point has been priced in by the market, some economists and market men are clamouring for a higher rate cut to bring private investment and demand back in the sagging economy. Despite strong macro positives like a stable rupee and lower crude oil prices, the economy is stuck with low credit growth due to severe liquidity situation created post the IL&FS crisis. Some also feel that there is an impression of a fear psychosis prevailing among industry people at present because of an overbearing tax structure measures along with heavy regulatory policies. This impression of fear factor should be solved immediately to bring back the animal spirits and arrest the slowdown and reverse the vicious cycle prevailing at present. Global investors are looking at new investment opportunities around the world and India should certainly debate positively on the proposed sovereign bonds issue to bring savings into our country. The government should also fast track new policy initiatives and implement them on an urgent basis. On the other hand, investors should not be worried about the current downward volatility in the stock markets but stay invested, as markets have rewarded those who have shown conviction in tougher times such as now. Good management and stable businesses are one of the main criteria to invest in good companies such as Nestle India. Foreign FMCG companies depending on Indian domestic consumption have done well in the last 50 years on the back of excellent growth trajectory due to stable business demand. The company has recently announced to set up a new state of the art factory for production of Maggi noodles in Sanand in Gujarat by investing around Rs 700 crore in the next two years. This would also generate employment for about 400 people, with at least 50% reserved for women employees. FMCG major Nestle India reported a good set of June 2019 end quarterly numbers, with a 10.83% increase in net profit to Rs 437 crore as against Rs 395 crore for the same period of last fiscal. Net sales during the quarter under review were up 11.35% at Rs 2,982 crore as against Rs 2,678 crore in the year ago period. The company has also announced an interim dividend comprising Rs 23 per equity share and a whopping special dividend of Rs 180 per equity share out of accumulated profits of previous years (surplus in the P&L account). The total interim dividend of Rs 203 per equity share will be paid to shareholders before 23 August with the record date set at 13 August 2019. The Nestle India stock quoting at Rs 11,415 is a good portfolio buy for excellent long term gains.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

 

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