“I think great investors to some extent are like great chess players. They’re almost born to be investors.” - Charlie Munger
Increased scrutiny of investments coming through Mauritius could be a short-term dampener for the market. While Mauritius is number four on the list of countries through which foreign capital flows into India, there are two immediate concerns for the market.
One, the amendment which says that investments made before 2017 too will be subject to fresh scrutiny. That is, even funds in existence before 2017 will need to show proof that they were not created solely for the purpose of claiming tax benefits. This could lead to some investments through dodgy structures being liquidated.
On balance, investments through Mauritius no longer offer the kind of tax advantages that they used prior to 2017, when loopholes in the double taxation avoidance agreement between India and Mauritius were plugged. That explains why money coming through other jurisdictions with tax advantages—Singapore, Luxembourg and Ireland—have been growing at a faster clip.
But the other big worry now is that tax treaties with other jurisdictions too could be tightened in the days ahead.
Many HNIs in India have been routing some of their investments through Mauritius, primarily to bid for shares in IPOs in the anchor book, posing as institutional investors. This activity could grind to a halt in the coming days.
Interglobe Aviation (Rs 3,806, +4.73)
The IndoGo stock continues to rise, defying rising crude prices.
Bull argument: Consistent growth in domestic air traffic growth. The sector in general appears to have better pricing power for now. Q1 traditionally a strong quarter for aviation because of summer vacations.
Bear argument: About one-fifth of Indigo’s fleet is grounded due to Pratt and Whitney engine issues. Former promoter Rakesh Gangwal could sell
some more of his holdings too.
Dixon Technologies (Rs 7,814, +1.6%)
Company to acquire majority stake in electronics and mobile devices manufacturing firm Ismartu India for Rs 238 crore in an all-cash deal.
Bull argument: Recent tie-ups with Ismartu and Compal have the potential to increase the export share over the medium term, says Kotak Institutional Equities. FII and mutual fund have been steadily upping their stake over the last three quarters.
Bear argument: The stock is trading at 133 times trailing 12-month earnings. For a company with gross profit margins of 4 percent, it will need to grow revenues in a big way to sustain high valuations. Intense competition in consumer electronics and home appliance businesses; the segment reported modest growth in revenues in Q3. Demand for lighting products weak.
Lemon Tree (Rs 140.65, +2.1%)
Lemont Tree announced its foray into Nepal with the opening of Lemon Tree Premier in Kathmandu.
Bull argument: The company plans to build a portfolio of 13,433 rooms by FY27 from the current operational portfolio of 9,687 rooms. Aiming to become debt-free in the next four years. Domestic institutions have been raising stake in the company.
Bear argument: Scope to increase room rates from current levels looks limited as prices are already high and fresh capacity is slowly coming in.
MCX (Rs 3,898, (+ 4.45%)
Shares of MCX gained over 4 percent on April 10 after brokerage Motilal Oswal upgraded the stock to a ‘buy’ call with a Rs 4,300 target price.
Bull argument: The only listed commodity trading platform. Options contracts are seeing heavy trading. New product launches should drive growth, along with completion of software transitions, says MOSL. Third quarter revenues rose 33 percent year-on-year.
Bear argument: The company reported a net loss in Q3. Over the last year, the platform has faced numerous technology related challenges.
With inputs from Srushti, Ananthu, Yash, and Anishaa.
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