FMCG stocks stepped into the limelight today, ending up to 3.6 per cent higher, as common use products such as hair oil, soaps and toothpaste will cost less from July 1 when GST is due to set in.
Shares of Colgate Palmolive gained 3.59 per cent, Tata Coffee rose by 3.07 per cent, ITC (2.82 per cent), Emami (2.46 per cent), HUL (2.04 per cent), Tata Global Beverages (1.46 per cent) and Marico (1.32 per cent) on BSE.
The FMCG index ended 1.86 per cent higher at 9,627.43.
"As GST is one of the biggest tax reforms to be rolled out, it would go on to boost the positive sentiment for the markets. As such, sectors which could see a benefit due to the GST rates announced till now would include FMCG, utilities and other metal companies that use coal as an input, dairy, etc," said Nitasha Shankar, Sr Vice President and Head of Research, YES Securities India Ltd.
On the first day of a two-day meeting of the GST Council yesterday, it was decided that commonly used products like hair oil, soaps and toothpaste will be charged with a single national sales tax or GST of 18 per cent.
These items at present attract 22-24 per cent tax incidence through a combination of central and state government levies.
FMCG firm Dabur welcomed the rates on commonly used consumer items, stating it would be beneficial but more clarity is needed to figure our the overall impact.
"The announcement of 18 per cent GST rate for soaps, toothpaste and hair oil is along the expected lines and is certainly welcome. It will have a positive impact on our business," Dabur India CEO Sunil Duggal said.
He, however, said this covered only about 20 per cent of the company's business and "we are still awaiting clarity on categories like health supplements, shampoos and packaged juices (among others)".
"Overall, FMCG companies will see a wider market opening up for them," said Vaibhav Agrawal (Head of Research and ARQ), Angel Broking.
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