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Sensex Trades Flat; ITC Hits New High on GST Boost
Mon, 22 May 01:30 pm

After opening the day on a positive note, the share markets in India trimmed its gains and are trading above the dotted line. Sectoral indices are trading mixed, with stocks in the FMCG sector leading the gains, while stocks in the PSU sector are trading in red.

The BSE Sensex is trading higher by 53 points (up 0.4%) while the NSE Nifty is trading higher by 7 points (up 0.4%). The BSE Mid Cap index is trading down by 0.8% and BSE Small Cap index is trading down by 0.4%. Gold prices, per 10 grams, are trading at Rs 28,691 levels. Silver price, per kilogram is trading at Rs 39,431 levels. Crude oil is trading at Rs 3,309 per barrel. The rupee is trading at 64.99 to the US$.

FMCG stocks are trading on a positive note with Marico and Lakshmi Overseas Ind leading the gains. ITC share price gained as much as 5% today after the Goods and Services Tax (GST) Council has announced the tax rates for the various items.

The GST tax rate on cigarettes has been fixed at 28%, while a 5% cess and duty per stick will also be levied, bringing total tax incidence to the current range of 60%. Thus, the overall tax impact is going to be neutral, the reports noted.

One must note that, ITC gets 35% revenue from the other FMCG categories including that of agribusiness, wherein the GST rates for most of the categories are 18% or less. ITC had witnessed months of pain on the back of an uncertainty in the GST tax rates on cigarettes. However, with the tax slabs fixed in the range of 5-28%, coupled with a cess cap of 15%, taxation on cigarettes are set to be lower.

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Reportedly, with the government focus on keeping tax on items of mass consumption low, this sector could be the clear winner. While milk, grain and cereals are exempt from GST; other products like sugar, tea, coffee and edible oil will attract just 5% GST.

We believe that GST is one of the key reforms that has the potential to bring about a structural change in the Indian economy.

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Moving on to the news from stocks in pharma sector. Lupin share price plunged 3.3% after the company announced that it has received approval for Bepotastine Tablets from the Central Drugs Standard Control Organisation (CDSCO). Lupin will commence promoting the product in India shortly.

Bepotastine is a new second generation antihistamine medicine to be introduced into the Indian Pharmaceutical Market (IPM) which could benefit patients suffering from allergic symptoms.

Reportedly, Bepotastine is approved by PMDA Japan and is actively marketed in Japan and other South East Asian countries. The current market for plain antihistamines is estimated to be around Rs 8.6 billion growing at 14%, as per IMS MAT March 2017.

In another development, it was reported that Natco Pharma has received environment clearance (EC) for its Rs 4.8 billion expansion project in Telangana that would generate 1,500 jobs.

The proposal is to increase the production capacity of 66 Active Pharmaceutical Ingredients (APIs) and API intermediates at a time with research and development activity from 115.5 tonnes per annum (TPA) to 645 TPA.

As per the proposal, the cost of the expansion project is estimated to be over Rs 480 crore and will provide direct employment to 1,200 and indirect jobs to 300.

Notably, as per a report by The Hindu Business Line, in spite of the prevailing challenges in the Indian pharma sector is expected to grow up to 45% by 2025 and 58,000 additional employment opportunities are likely to be created in the industry amid the job crisis in India.

Indian Pharma Revenue Growth Accelerates

Despite the capping of prices, notebandi and GST implementation, all of which are perceived to impact the pharma sector adversely, the industry will continue to grow. In fact, by 2020, the pharma market will be touching US$ 55 billion, with a CAGR of about 15.9%.

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