GST Rate Reduction: Increase in Consumer Discretionary Stocks

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Consumer stocks rallied on Monday after the government decided to lower the Goods and Services Tax (GST) rate on a wide range of products offered to investors. The values ​​of shoe companies such as Relaxo Footwears and Bata India have jumped to record levels.
The Procter & Gamble stock also hit a new high of 10,505.70 rupees on BSE.

% gain, followed by Bata India, up 6.7%. Bajaj Electricals and V-Guard Industries also jumped 5.9% and 5.3%, respectively. Market participants noted that the latest drop in GST rates would significantly increase corporate profits in this sector as it would help boost consumer demand

. the 5% slab, the GST on paints, refrigerators, washing machines, vacuum cleaners, water heaters and small televisions has been reduced from 28% to 18%. The better than expected figures posted by Bata India in the first quarter of fiscal year 19 also boosted investor confidence.

The main shoe reported a net profit of Rs 82.6 crore, beating the Bloomberg consensus estimate of Rs 72.5 crore for the three months to June 2018.
Ambit Capital, which has a stock quotation on the stock, observed the growth income of Bata India was led by End of Season Sale (EoSS). "The gross margin grew by 50bp year-over-year to 53.3% because of the decline in the net value of sales due to the GST and the deflation of the cost of goods sold," she adds. Year-on-year at Rs 131.8 crore largely due to the benefits of the GST input tax credit on expenses such as rent and other expenses, said the brokerage firm. Shares of cigarette producers Godfrey Phillips and ITC also rose, as the GST Council did not change the price of cigarettes. While Godfrey Phillips' share price shot up 8% – its biggest rise in a single day in 2018 – ITC gained 3.8% to close at Rs 283.85.

Gains in stockpile ITC also propelled the Senbad index to a fresh life peak of 36,718.60. The main cigarette contributed 40% of the index gain of 222.23 points on Monday. The BSE index of durable consumer goods rose 1.3% – its largest gain on a single day in three weeks – to end at 20,232.58. After the revised rates, only 35 items will remain in the 28% range, compared with 226 on July 1st of last year.