Posts Tagged ‘disinvestment’

BUDGET PREVIEW 2011 – Final Part :)

Continuing The Final Part Of The Budget Preview 馃檪

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We believe that this year Finance Minister will take a gradual move towards fiscal consolidation by聽increase in Excise duty. Excise duty forms around 40% of Indirect Tax collections. Excise duty collections were聽down by 13% in April to December period to close to Rs. 70,000 crore comprising around 66% of Budgeted聽Estimates of Rs. 1,06,477 crore. The factors that contribute to our belief are; 馃榾

路Though the growth in corporate sales is not astonishing but profitability has improved to due to various聽cost control efforts which is quite evident by the corporate tax collection that have shown a growth of聽44% in December 2009. Cumulatively Net direct tax collections increased by 8.5 per cent during April-聽December 2009.

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路India being a consumption story has shown healthy growth in sales of consumer durables. For instance Automobile industry’s sales聽went up by 32 per cent in December over the same month in 2009. It is believed that a gradual hike in duty will get absorbed聽without affecting medium term prospects of the industry.

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路Partial rollback would also help the finance ministry effect a calibrated integration of excise duty with the services tax by the end聽of the next financial year, when the proposal for a Goods and Services Tax is likely to be implemented.

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路Finance Minister had indicated that he would like the fiscal deficit for 2010-11 to be around 5.5 per cent of GDP. The proposal to聽raise excise duty by two hundred basis points is being endorsed also to help the finance ministry raise more revenue and stick to聽the projected fiscal deficit target.

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Disinvestment would be the key focal point in the Budget. We believe that the Finance Minister would place high targets from the PSU sale proceeds. The factors that contribute to our belief are:

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路In order to bring Fiscal deficit under control that would subsequently ease upward pressure on interest rates.

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路This will help Investment in social sector projects which promote education, health care and employment & will also help in聽Capital investment.

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On the Corporate Tax front, we believe that the Finance Minster is unlikely to lower tax to 25% from the current 30% as per Industry demands. The rationale behind our belief is:

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路The direct tax code that proposes corporate tax to be 25% will be implemented in fiscal 2011 鈥 2012 & Industry have to wait till its聽implementation as it will replace the existing Income Tax act.

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路Already, government is trying to make up more tax revenue & is unlikely to take step in this direction as it may come as an聽obstacle in order to control fiscal deficit.

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On deregulation of Petroleum sector, we believe that in order to cut down on subsidies government could provide the road map for partial deregulation of the petroleum sector. The road map may provide OMC’s to review the prices of petrol and diesel on a聽regular basis however, LPG and kerosene could continue to be administered by the government. Factors that complement to our belief:

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路In view of the commitment of the UPA regime to flagship social security programmes聽that require huge allocations, Mr. Mukherjee has told Mr. Deora that it would not be聽possible to provide huge subsidies to the OMCs in future.

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On the External Economy side, we expect that the Finance Minister may continue to聽provide certain concessions like interest subsidy and extension of other export oriented聽schemes. The rationale to our belief:

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路In the recent two months i.e. November & December, merchandise exports registered a聽positive growth of 18.2% & 9.3% respectively. But in the period of April to December聽2009, the exports were still negative to the tune of 20% as compared to the聽corresponding period.

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路The world economic recovery especially in US & Europe is still questionable & the regions constitute approximately 15% & 21%聽respectively of our merchandise exports, thus directly affecting the trade.

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路Sectors such as engineering goods, jute, carpets, handicrafts and leather goods are continue to be in bad shape, others such as聽gems & jewelry drugs, plastics and petroleum products are showing improvement.

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路Concluding, the main point is that it may not be a good time to take back the stimulus so soon that may derail the recovery.

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Note : For More Latest Industry, Stock Market and Economy News and Updates, please聽click here

Weekly Update of The Market (08th-12th February)

Hello Friends, here, we bring you the weekly overview of the Indian as well as of the Global economy and聽 latest global business and industry updates.

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Weekly Update of The Market (08th-12th February)

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After starting the year on a good note & Indices making fresh highs within few weeks many Asian markets have corrected between 7 to 10%.

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The global sell off over sovereign debt problems in Europe and an unexpected rise in jobless claims in US put investors on the defensive mode.

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The anxiety about sovereign debt in Greece, Portugal and Spain sparked a sell-off in the Euro & has led strength to US dollar.

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Foreign investors sell off is an outcome of dollar-carry-trade unwinding as when they borrowed the dollar was cheap & now it is recovering.

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Investors viewed the markets in year 2010 with confidence in view of recovery gaining momentum is now shaken over the debt problems, nascent economic recovery & confidence of the governments that stand behind the euro.

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Efforts of China to curb lending preventing overheating in economy also pose a risk to derail the global recovery.

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Back at home, the effect of turmoil in the international market also made government to think its strategy on ambitious disinvestment programme.

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Lukewarm response to the NTPC, the much awaited issue managed to get subscription of just 1.2 times on its closing day.

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The maximum bid of 20.87 crore shares was put by Indian institution under the first time adopted French Auction route.

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This has challenged the finance Ministry hopes on the proceeds from disinvestments to make up the sliding revenue & rising expenditure.

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While it looks that PSU disinvestment may not yield desired results on market weakness, the 3G auction i.e. expected to garner Rs. 35,000 crore could be postponed to next fiscal year.

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The fate of some of the IPO’s like NMDC, Satluj Jal Vidyut Nigam Ltd and Rural Electrification Corporation that are on the disinvestment agenda before March 31, looks tough to sail through, if the stock markets do not rise and big investors do not come back.

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On the contrary, Banks like Bank of Baroda & Indian Bank that were expected to raise money overseas have put now their plans on hold.

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The good news from the external sector continued as the data showed a 9.3% annual increase in exports in December to $14.6 billion, a second consecutive month rise.

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While imports increased by 27.2% from a year earlier to $24.75 billion.

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Food inflation remained at high levels & rose to 17.56% in the week ended 23 January 2010 from 17.40% in the previous week on the back of rising pulses & potato prices.

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Markets are likely to take a closer view of the advance estimates on economic growth for the current fiscal ending March 2010 scheduled to be released on Monday.

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In the days to come an activity in the sectors like railways, fertiliser, textiles, pharma, education, power and infrastructure may be seen on expected positive policy announcements and budgetary sops.

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It was clearly mentioned last week that world markets are going in downtrend and one should be careful in such a scenario and that one should be moving in cash.

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Now the markets have taken a very sharp fall last week due to rise in Dollar Index and fall in all asset classes.

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The coming week might see some counter rally from lower levels.

Nifty faces resistance between 4900-5000 levels and Sensex between 16400-17000 levels.

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If we talk about commodity markets then one can see that strengthening dollar and lack of firm global cues had pressurized commodities prices to move southward.

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Investors are selling riskier assets and putting their money in dollar as a safe haven buying.

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Debt concerns facing Greece, Portugal and Spain coupled with dollar index which is trading above the mark of 80 is most likely to compel commodities to trade lower.

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French and euro zone GDP, USD advance retail sales, USD U. of Michigan Confidence will give further direction to commodities.

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Investors should keep an eye on gold 鈥 silver ratio.

It was 58:1 few months back, now reached to 67:1 on MCX, heading towards the level of 70:1.

It is demonstrating more selling in silver.

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Stay Tuned for More on weekly updates.

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Note : For More Latest Industry, Stock Market and Economy News and Updates, please click here

India Inc Set to Raise Rs.50k Crores Through IPOs in 2010: SMC Capital

India Inc Set to Raise Rs.50k Crores Through IPOs in 2010:SMC Capital

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Domestic companies seems set to get on with the huge fund raising exercise this year with plans to raise over Rs 50,000 crore via public offers, driven by the sharp recovery in the stock market.

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Almost 50 companies have already filed the draft prospectus with the market regulator, the Securities and Exchange Board of India (SEBI).

This depicts at the healthy prospect of the strong IPO market after the encouraging revival of IPO market in 2009.

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Indian companies had raised about Rs 20,000 crore through IPOs in 2009.

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Market Experts feel that fund raising can go up to Rs 50,000 crore this year since Government has already planned to sell shares in a host of public sector companies by way of IPOs and follow-on public offers (FPOs).

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Five companies aiming to raise over Rs 300 crore have already received the regulator鈥檚 clearance for the IPO, if draft prospectus filed with the SEBI is anything to go by.

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鈥淭he IPO pipeline looks strong in 2010.

Also the way the government is pushing ahead with the disinvestment plan, fund raising can go up to Rs 50,000 crore by the end of the year,鈥 SMC Capitals Equity Head Jagannadham Thunuguntla said.

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As part of its disinvestment plans the government intends to raise over Rs 20,000 crore by way of FPOs of NMDC, SAIL, NTPC, and REC.

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Some of the prominent private companies which have their IPOs lined up, beside this, include Jindal Power, BPTP, Reliance Infratel, Emaar MGF etc;

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鈥淥f the total IPOs that are in the pipeline, as many as 16 are from real estate sector. However, their success is a bit doubtful as the appetite for realty IPOs are currently less,鈥 Thunuguntla added.

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Primary market fund raising in 2008 saw 30 IPOs mopping up Rs 17,000 crore, but shares of many these companies gave the investors modest-to-good returns.

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Note : For More Latest Industry, Stock Market and Economy News and Updates, please click here

India Inc Set to Raise Rs.50k Crores Through IPOs in 2010

India Inc Set to Raise Rs.50k Crores Through IPOs in 2010.

.

Domestic companies seems set to get on with the huge fund raising exercise this year with plans to raise over Rs 50,000 crore via public offers, driven by the sharp recovery in the stock market.

.

Almost 50 companies have already filed the draft prospectus with the market regulator, the Securities and Exchange Board of India (SEBI).

This depicts at the healthy prospect of the strong IPO market after the encouraging revival of IPO market in 2009.

.

Indian companies had raised about Rs 20,000 crore through IPOs in 2009.

.

Market Experts feel that fund raising can go up to Rs 50,000 crore this year since Government has already planned to sell shares in a host of public sector companies by way of IPOs and follow-on public offers (FPOs).

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Five companies aiming to raise over Rs 300 crore have already received the regulator’s clearance for the IPO, if draft prospectus filed with the SEBI is anything to go by.

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“The IPO pipeline looks strong in 2010.

Also the way the government is pushing ahead with the disinvestment plan, fund raising can go up to Rs 50,000 crore by the end of the year,” SMC Capitals Equity Head Jagannadham Thunuguntla said.

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As part of its disinvestment plans the government intends to raise over Rs 20,000 crore by way of FPOs of NMDC, SAIL, NTPC, and REC.

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Some of the prominent private companies which have their IPOs lined up, beside this, include Jindal Power, BPTP, Reliance Infratel, Emaar MGF etc;

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“Of the total IPOs that are in the pipeline, as many as 16 are from real estate sector. However, their success is a bit doubtful as the appetite for realty IPOs are currently less,” Thunuguntla added.

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Primary market fund raising in 2008 saw 30 IPOs mopping up Rs 17,000 crore, but shares of many these companies gave the investors modest-to-good returns.

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Indian Stocks Rose After Govt Approved Disinvestment Plans

Indian Stocks Rose After Govt Approved Disinvestment Plans

Indian Stocks Rose After Govt Approved Disinvestment Plans

Indian stocks rose, extending the benchmark index鈥檚 longest string of gains in five weeks, after the government approved a plan to sell more shares in state- controlled companies, helping it raise funds to boost spending.

MMTC Ltd., India鈥檚 biggest state-owned trading company, surged 20 percent, the most in 10 months.

Rico Auto Industries Ltd., an auto component maker that supplies General Motors Co. and Ford Motor Co., climbed 5.1 percent after workers ended a 45-day strike.

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The Bombay Stock Exchange鈥檚 Sensitive Index, or Sensex, rose 94.38, or 0.6 percent, to 16,158.28.
The measure this week gained 1.7 percent, snapping two weeks of losses.

The S&P CNX Nifty Index on the National Stock Exchange rose 0.6 percent to 4,796.15.
The BSE 200 Index added 1.1 percent to 2,011.08.

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鈥淭he disinvestment move will help moderate India鈥檚 fiscal deficit,鈥 said Jagannadham Thunuguntla, head of equities at SMC Capitals Ltd. in New Delhi.

鈥淎lso, it may help in higher GDP growth led by increased government spending.鈥

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MMTC soared 20 percent to 36,146.85 rupees, the most since Dec. 17.
State Trading Corp., the No. 2, leapt 15 percent to 353.6 rupees.

NMDC Ltd., India鈥檚 largest iron-ore producer, climbed 10 percent to 338 rupees.聽

Hindustan Copper Ltd., India鈥檚 biggest copper miner, 99.59 percent state-owned, gained 10 percent to 256.35 rupees.

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Budget Deficit

The government owns 99.33 percent in MMTC and 91.02 percent in State Trading, while it holds 98.38 percent in NMDC, according to filings to the Bombay Stock Exchange.

The government will use the money raised from the sale of shares of state companies for social spending.

India鈥檚 fiscal deficit reached 6 percent of gross domestic product in the year ended March 31, surpassing the 2.5 percent government target.

The key Sensitive stock index has more than doubled from this year鈥檚 lowest level, in March.

Govt’s stand to sell state assets and accept more overseas funds into insurance and banking, has strengthened, after Prime Minister Manmohan Singh resounding re-election victory in May.

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Centre To Go Ahead With PSUs Disinvestment :)

Prime Minister Manmohan Singh reiterated that Centre will go ahead with the disinvestment in public sector undertakings (PSUs).

Prime Minister Manmohan Singh reiterated that Centre will go ahead with the disinvestment in public sector undertakings (PSUs).

While efforts will be made to recover loss-making units, the Centre will go ahead with the disinvestment in public sector undertakings (PSUs) stated Prime Minister Manmohan Singh.

However, this is said :

–聽 to unlock the true value of a company,

– improves its corporate governance standards and

– also help it in raising resources for funding future expansion plans.

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Additionally, several PSEs are entering the capital markets striving to become active global players.

At the same time several PSEs got their shares listed on the markets in the last 2 years and many more want to do so, showing they are not shying away from market scrutiny and are ready to face new challenges.

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Further, stressing the need for strengthening the public sector, MMS said that the government was committed to restructure and recover sick and loss-making PSUs.

Moreover, amount of Rs. 15,250 crore is provided by the government in the last 5 years as cash and non-cash support to 36 such enterprises.

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On the other hand, stating that the Centre was committed to giving PSUs flexibility and autonomy to operate effectively in a competitive environment, MMS stated that they have delegated more powers to the boards of Navratna and Miniratna companies.

This was done in order to facilitate improvement in their performance, implemented revised salaries for executives of public sector enterprises and introduced innovative measures like performance related pay.

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Positive Undertones in the Economy 鈥 Part 2 :)

Positive Undertones In The Economy

Extending to the yesterday’s post on the positive undertones of the economy in the markets and investors tips, here we coming up with the more factors which investors should use for picking up fundamentally good stocks.

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1. Reality companies hike rates by 15%

Reality sector is witnessing a substantial demand, especially in the mature markets, after the prices dropped a few months ago.

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With the gradual return of residential property buyers, prices in NCR and Mumbai areas have moved up 10-15%.

How long these prices will sustain is hard to determine, but this indicates the confidence of investors.

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2. India..in Better Position

India can be considered as 鈥渂alanced鈥 in terms of investment and consumption with savings rate of 35% and consumption of 65% of its GDP.

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The fastest growing China leans towards investment, whereas most of the western countries are weighted more towards consumption.

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If we compare India’s Sensitive Index with its other Asian peers, Sensex is valued at 17.6 times estimated earnings where as China’s Shanghai Composite Index trades at 22 times earnings and the MSCI Asia Pacific Index is valued at 24 times.

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So, India remains very attractive and it is an opportune time for Indian companies to grab market share.

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3. Developments in the rest of the economy 馃檪

If we see the positive economic numbers across the globe, it seems that world economy is moving towards recovery.

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Australian economy surprised with a jump in growth in the second quarter.

US have witnessed a growth in the current quarter GDP, US manufacturing and housing sectors appears to be gathering pace, quarter’s results came better than expected.

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European economies like France and Germany continued their gradual emergence from the worst crisis in decades and company results showed an upturn.

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4. Concerns Over Weak Monsoon!

Everyone is expecting that poor rains would push up food prices in the short-term, due to the reduced yield of kharif crop and it would add to inflationary pressures.

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But at the same time, we should also know that Indian agriculture is not limited to agro commodities only, but it is well diversified into horticulture, livestock and fisheries and their share in total output of the agricultural sector is increasing.

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Total agricultural output accounts for only 18.5 % of the gross domestic product and the kharif crops like cereals, pulses and oilseeds account for only 20% of it.

Moreover, government spending in rural areas will mitigate the effect of diminished monsoon rains.

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So, Looking at the above factors, India growth story remains strong in the long run.

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So, one can go for the companies, which will benefit from 鈥淓conomic growth鈥 like power plants, roads, service providers like banking and engineering sector.

Thanks 馃檪