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FMCG Stocks Out of Favour
Mon, 29 Feb 01:30 pm

After opening the day flat, the Indian indices became volatile, ahead of Budget. With no big bang reforms announced, the indices have slipped in the red. Sectoral indices are trading mixed with stocks from the FMCG and IT sectors leading the losses. Banking and oil & gas sectors are leading the gains.

The BSE Sensex is trading down by 19 points (0.1%) and the NSE Nifty is trading down by 4 points (0.1%). The BSE Mid Cap index is trading up by 0.1% while the BSE Small Cap is trading up by 0.2%. Gold prices, per 10 grams, are trading at Rs 29,620 levels. Silver price, per kilogram, is trading at Rs 36,048 levels. Crude oil is trading at Rs 2,260 per barrel. The rupee is trading at 68.48 to the US$.

With rising taxation becoming the norm, the cigarette industry was faced with another round of hikes this year. In the Union Budget 2016, the excise duty on tobacco products has been increased by 10-15%.

Cigarette industry has been witnessing lower volumes in last few quarters. This due to multiple excise duty hikes initiated by the government for four consecutive years. In financial year 2015-16, excise duty was hiked 25% for cigarettes with lengths less than 65mm and increased by 15% for lengths above 65 mm.

The Finance Minister Arun Jaitley announced a 1% additional tax on cars costing above Rs 10 lakhs. Further, in a move aimed at checking pollution and encouraging use of hybrid cars, FM Jaitley also announced that a 1% infra cess will be levied on small petrol cars. A 2.5% infra cess will be imposed on diesel cars. Also, a 4% additional levy will be imposed on high-capacity passenger vehicles and SUVs.

There was a minor relief for the common man , after the Budget announced that the tax relief on House Rent Allowance (HRA) will be raised from Rs 24,000 per annum (p.a.) to Rs 60,000 p.a.

The Budget retained FY16 fiscal deficit target at 3.9% of GDP. Further, the fiscal deficit target for FY17 was kept at 3.5%.

From focus on agriculture to tax and financial sector reforms, Jaitley outlined nine pillars to transform India. These were-

  • Agriculture and farmer welfare. The Budget announced to double farmers' income in the next five years.

  • Rural sector

  • Social sector, including healthcare

  • Educational skills and job creation

  • Infrastructure investment

  • Financial sector reforms

  • Governance reforms and ease of doing business

  • Prudent management of government finances

  • Tax reforms to reduce compliance burden

We will be discussing our views on the Budget in today's edition of The 5 Minute WrapUp. It will cover the key announcements made by Finance Minister Arun Jaitley and its impact on the Indian economy. Be sure you don't miss it! Click here to sign up for your free subscription...

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Jan 19, 2018 (Close)