According to market experts, GST aims to simplify the current indirect tax regime by bringing all central and state levies (like excise duty, sales tax, octroi, VAT and other countervailing duties) under one single head having uniform tax rate across goods and services (with some exclusions like electricity, alcohol and petroleum products).

Benchmark indices extended gains last week and closed 1 per cent up following positive global cues and hopes of smooth passage of the Goods and Services Tax (GST) bill in the ongoing Winter session of the Parliament.

During the previous week ended November 27, 2015, Sensex gained 259.71 points to 26,128.20 on November 27, while Nifty gained 86.15 points at 7,942.70.

GST aims to simplify the current indirect tax regime by bringing all central and state levies (like excise duty, sales tax, octroi, VAT and other countervailing duties) under one single head having uniform tax rate across goods and services (with some exclusions like electricity, alcohol and petroleum products).

In response to favourable outcome related to GST in the ongoing Parliament session some positive statements were made by the government representatives and the same were supported by some opposition parties also. According to reports, government is hopeful of passage of the GST bill in the Winter session of the Parliament as it claims 30 of the 32 parties have supported it. GST will be in focus this week after Prime Minister Narendra Modi met Opposition Congress party leader Sonia Gandhi for talks last week to try and break a deadlock over the new indirect tax.

Jayant Manglik, president, retail distribution, Religare Securities, said, “If the bill doesn’t get passed in the winter session, the government will miss the 1 April roll-out date and that will certainly dent the sentiments.”

The benefits of GST are immense in terms of reducing economic distortions, creating a nationwide single tax market, widening of tax base and eliminating cascading of taxes (tax on tax).

However, Chandan Taparia, analyst, Anand Rathi securities said, “In Rajya Sabha 1/3 members retire by every 2 years, so if the bill will not clear in the ongoing session then it will delay till 2017.”

For manufacturing companies, it means level playing field for organised and unorganised sectors, and cost optimisation in terms of movement and warehousing of goods due to uniform tax rate. Consequently, it would have positive fallout on inflation, curtailing tax avoidance and creating buoyancy in the economy.

According to estimates, the implementation of GST could bring in incremental positive effect of 1-1.5 per cent in the GDP depending upon the GST rate (likely range of 18-20 per cent would mean tax saving of 3-4 per cent for many manufacturing segments; a GST rate beyond 22 per cent could be detrimental for business confidence and growth in near term) and in ideal conditions.

However, Sharekhan in a research note said, “The proposed GST bill has exclusions and an additional tax of 1 per cent for inter-state movement for the initial two years which dilutes the essence of GST (to an extent) and limits positive impact on the economy.”

Vijay Singhania, founder, director, Trade Smart Online, said, “Clearance of GST bill in the prevailing winter session holds prominence currently. Optimism on the GST bill has built up over the last few days, however, overall expectations from the ongoing Parliament session is low. So, if anything positive come out then that could be the trigger for the markets.”

We list out 15 stocks that brokerage houses believe may benefit with the passage of GST.

Picks by Sharekhan

1) Maruti Suzuki India: Potential reduction in effective tax rate for mid-sized passenger vehicles.
2) Britannia Industries: Cost optimisation at each level of product value chain and competitive advantage could improve the growth prospects in long run.
3) Gateway Distriparks: With services across the distribution value chain, it will gain from incremental demand arising from the higher inter-state transport of products.
4) Century Plyboards: Organised players to gain market share with unorganised players losing tax advantage.
5) Pantaloons Fashion & Retail: Set-off for service tax paid on lease rentals and inventory cost optimisation.

Picks of Anand Rathi Securities

1) Bata India and Relaxo Footwear: According to Chandan Taparia, there are so many types of taxes that are levied by the Central and State Governments on goods and services, with the implementation of GST footwear companies will also be benefit as they transport their final products to their regional heads and then local dealers.
2) Exide Industries and Amara Raja Batteries: These stocks will also benefit with the passage of GST. Lower lead and copper prices are also supporting to batteries companies and raw material cost is also declining.
3) PVR and Dish TV: Entertainment taxes will be absorbed once the GST will be implemented.
4) Others stocks: Cigarette majors ITC and Godfrey Phillips and some FMCG companies like Emami and Dabur will also benefit from the GST implementation.

(Disclaimer: The stocks are recommended by the respective brokerage houses and not a recommendation from Financial Express online)

Amtek Auto share price fell as much as 5.62 per cent in the early trade on Monday after the company on Saturday reported a consolidated net loss of Rs 987 crore for the year ended September. (Photo: Reuters)

Amtek Auto share price fell as much as 5.62 per cent in the early trade on Monday after the company on Saturday reported a consolidated net loss of Rs 987 crore for the year ended September against a net profit of Rs 848.21 crore last year. Amtek Auto follows October-September financial year.

At 9.30 am, the share price of Amtek Auto was down 2.58 per cent at Rs 41.60. The scrip opened at Rs 41.90 and had touched a high and low of Rs 41.90 and Rs 40.30, respectively, in trade so far. Sensex was up 52.45 points at 26,180.65.

Total income of the company fell to Rs 15,213.4 crore, from Rs 15,706.6 crore a year ago, Amtek Auto said in a BSE filing. For the quarter ended September, it reported a stand-alone net loss of Rs 158.62 crore as against a net profit of Rs 74.37 crore in the same period of the previous fiscal.

Total income has narrowed to Rs 833.8 crore for the quarter under review, from Rs 1,042.1 crore a year earlier.

The Delhi-based company had defaulted on repayment of bonds worth Rs 800 crore in September, thus signaling a crisis. Trouble started after leading fund manager JPMorgan Mutual Fund in August restricted withdrawals from two of its funds – JP Morgan India Treasury Fund and JPMorgan India Short-Term Income Fund, which have a collective exposure of about Rs 200 crore in Amtek Auto.

The bonds matured in September, but Amtek Auto was unable to make repayments to its investors as it was facing a “cash flow mismatch”.

(With inputs from PTI)

Cipla on Saturday said it has inked an investment agreement with FIL Capital Investments (Mauritius) II Limited for its consumer healthcare business. (Photo: PTI)

The BSE Sensex and NSE Nifty opened on a flat note on Monday tracking SGX Nifty and Asian markets. At 9.19 am, Sensex was up 24.99 points at 26,153.19. NSE Nifty was trading 0.50 points down at 7,942.20.

Below are some stocks that are likely to remain in focus today:

Amtek Auto: Share price of the company fell as much as 5.62 per cent in the early trade on Monday after the company on Saturday reported a consolidated net loss of Rs 987 crore for the year ended September against a net profit of Rs 848.21 crore last year.

Reliance Industries(RIL): Shares of the company were trading 0.55 per cent down at Rs 973.70 (10.33 am)as it is facing a 40 per cent cut in the marketing margin RIL charges on selling its KG-D6 gas to fertilizer and LPG plants after the government notified a ceiling of Rs 200 per thousand standard cubic meters (scm).

PVR:  Shares of the company were trading 0.53 per cent up at Rs 853.00 (10.42 am) after the multiplex chain operator expects to add at least 23 screens in the current financial year to take the total to 500 in the same fiscal.

Cipla: Shares if the drug major was trading 0.44 per cent up at Rs 645.45 (at around 10.35 am) after it inked an investment agreement with FIL Capital Investments (Mauritius) II Limited for its consumer healthcare business.

Rajesh Exports: Shares of jewellery maker jumped over 2 per cent in the early trade after the company informed stock exchanges that it has bagged an export order worth Rs 1,122 crore of designer range of gold and diamond studded jewellery and medallions from UAE. The order is to be completed by March 31, 2016. The scrip was trading 2.34 per cent up at Rs 695.20.

SpiceJet: The budget airline is in talks with Boeing and Airbus to buy more than 150 planes. The airlines is looking at both Airbus and Boeing. The (Boeing 737) Max aircraft as well as the (Airbus A320) Neo. The airline is in talks with Toronto-listed Bombardier, France’s ATR – a joint venture between Airbus and Finmeccanica – and Brazil’s Embraer to potentially buy a further 50 planes to service this sector.

Siemens Ltd: Siemens Ltd on Friday reported a 49.8 per cent plunge in standalone net profit at Rs 219.13 crore for the fourth quarter ended September 30.

Nestle India: Nestle India, which was hit hard by a ban on its popular instant noodles Maggi during the year, said the company may consider a second interim dividend for the current fiscal.

United Breweries (Holdings): Capital markets regulator Sebi slapped a fine of Rs 15 lakh on United Breweries (Holding) Ltd for not making disclosures regarding creation and invocation of certain pledge transactions in shares of United Spirits.

Emami Paper Mills: Emami Paper Mills Ltd, the country’s largest newsprint manufacturer, has decided to increase investment in paperboards to Rs 2,000 crore in the next three years to strengthen its diversification to the high-margin segment.

Yes Bank: Private sector lender Yes Bank has invoked 3.02 per cent stake of United Breweries, pledged by McDowell Holdings, a unit of Vijay Mallya-led UB Group, by selling shares worth Rs 778 crore.

IVRCL: The Hyderabad-based company has made an allotment of 24.27 million equity shares of Rs 2 each at issue price of Rs 24.39 per share to the CDR (corporate debt restructuring) lenders who have signed the master restructuring agreement last year.

Tata Global Beverages (TGBL): The company has launched an Instant coffee product in the Indian market under the brand name ‘Tata Coffee Grand’ on November 29, 2015. The product has been jointly developed by TGBL and its subsidiary, Tata Coffee (TCL). The product will be manufactured by TCL and marketed and distributed by TGBL.

Discretionary consumer spending was mediocre until September. During the first six months of FY16, the car market grew ~10% y-o-y (year on year). However, this growth is not in sync with any other discretionary products. Other consumer discretionary products including air conditioners, paints, and jewellery are not growing at more than mid/low-single digits with visible pricing/competitive pressure, as well as some down-trading in consumer buying (see charts). The SUV market has been a real reflection of continued muted consumer spending. Despite multiple launches, the SUV market has not grown at all in FY16 y-t-d (year to date) and all new products have just cannibalised the existing models. Even for the car industry, despite its growth, pricing has remained under pressure. In October, however, cars, UVs and 2Ws have all increased sharply, positively surprising the Street. This raises two key questions: (i) What led the +10% growth in the car market in the first half of FY2016 when spending across other discretionary items has been soft? and (ii) Is the sharp pick-up in October a flash in the pan or an early sign of a turnaround in consumer sentiment and spending?

We believe the growth in the car industry in H1FY16 was led by a few factors including AMT traction, continued high discounts, moderation in interest rates and new product launches. However, a key contributor to growth has been the increase in car sharing companies like Ola and Uber. While the exact numbers are not available, we believe that collectively these two companies have added nearly 75,000-100,000 vehicles in the past 6-9 months, explaining nearly 50-75% of the growth in the car industry. Car sharing is negative for the car industry in the long term, but in the near term fleet expansion has a positive impact on the new car market, in particular for Maruti (MSIL IN, R4,650, Buy) as its products are particularly well suited for the cab industry—WagonR and Dzire.

It is difficult to find many high frequency indicators for consumer confidence in India. Some, for example, the Naukri.com index, look encouraging, but are not very representative in our experience. Although the pick-up in October was encouraging, the extent of pick-up may be a one-off and unsustainable. Whilst we expect to see a more gradual recovery over the coming months, the pick-up is still directionally positive and should help support current valuations. Furthermore, the better-than-expected wage hike proposal for government employees should be positive for near-term auto industry volumes.

The Seventh Pay Commission’s recommendation of a 23.6% rise in central government wages was larger than market expectations of ~15%. The impact of wage increases on consumption demand could be strong as a larger government sponsored windfall is likely to coincide with gradually rising urban private sector wages; this is positive for the auto industry. While we expect a recovery in the auto industry to be gradual, sales growth from government employee spending and the likely implementation of GST in the near term should provide downside protection to our current estimates and help support valuations.