GST passage next big thing for markets; 15 stocks that could be good buys

Goods and Services Tax (GST) Bill is expected to see a passage in the ongoing monsoon session of the Parliament, which started from Monday. According to market experts, the passage would be the next big thing for India as it will potentially spur GDP growth and would result in a major positive trend for the stock market and the economy as a whole. The bill will reduce paperwork and enable efficient trade across the country. Sectors such as logistics, automobile, e-commerce and FMCG would particularly benefit with the passage.

Arun Gopalan, vice-president, Systematix Shares & Stocks said, “The GST Bill will benefit immediately to a few sectors of the economy, much of the enormous benefits will accrue over a period of time. Therefore, though there may be a robust surge in the equity markets on the passage of the bill, one has to ride it with caution. A 3-4 per cent gain in the Nifty is a distinct possibility if the GST bill sees the light of day in this monsoon session of Parliament.”

[related-post]

At present, each state charges different rates of taxes which influence business decisions on logistics and distribution systems.

With the advent of GST, this is likely to become more efficient as there will be one tax rate across the country. Also, movement of goods would be easier resulting in consolidation of logistics systems for the companies.

For equity investors, Vaibhav Agrawal, vice-president and head of research, Angel Broking identified 12 stocks from various sectors which can give good return to investors if GST will be implemented.

Logistics: Transport Corporation of India, VRL Logistics, Gati, Allcargo Logistics

Auto: Bajaj Auto, Hero MotoCorp, Maruti Suzuki India and TVS Motor

FMCG: Almost all the FMCG companies including Dabur, HUL, Emami and Marico can give good return with the passage of GST.

Arun Gopalan of Systematix Shares said:

a) Asian Paints, Godrej Consumer Products and Hindustan Unilever (HUL), which have a tax incidence close to 20 per cent or more, will be first to benefits from GST.

b) The next level of gains over the medium term will accrue to the logistics companies both in the warehousing and transportation space. So far manufacturing companies have been taking distribution decisions based on taxation rather than logistics needs. But GST will change all of that and bring down the logistics costs by as much as 20 per cent. This will benefit companies in the consumer durables space, such as Voltas. Also, the removal of check-posts at every state would reduce the transportation time by as much as 25 per cent. This dual benefit should help companies such as Allcargo Logistics.