Published : August 23, 2017
Indian stocks, not all but some, are expected to be affected adversely by GST implementation. Though goods and services tax (GST), may abolish the existing multiple tax structure yet the effect of GST seems to be negative in some sectors. It may uplift the service tax from current 14% to minimum of 18% which may negatively affect service sector, pharma, and wind power. This necessitates avoiding investing in shares of companies in these sectors. Idea Cellular, Suzlon Energy Ltd, Bharti Airtel, Alkem Laboratories and Cipla Ltd were screened to be negatively affected.
Goods and Services Act (GST) which was a long impending tax finally passed by both the houses of parliament. By the implementation of GST, India will come under the category of “one nation one tax” and will be among few nations in the world.
GST is a tax which will abolish the prevailing multi tax system and after implementation, only two tax will be levied by and collected, the details already been discussed in the report entitled, “5 Indian Stocks – Positive Effect of GST”.
GST will make a common platform for TAX collection and there are some sectors which will be adversely affected. 5 Indian stocks out of these sectors are being analyzed here which are expected to have a negative effect post-GST implementation.
In this section let’s talk about some of them. Sectors like pharma, wind power, telecom are considered to be negatively affected. It is expected that indirect tax paid by pharma companies might be increased by sixty percent and their products’ MRP (Maximum Retail Price) by four percent.
Wind Power is another sector to be adversely affected. Companies of Wind Turbine generator manufacturers will face pressure on developer margin and internal rate of return.
Telecom sector is being a service sector is also going to face negative consequence as the current service tax of above 14 % is expected to rise by a minimum of 17%-19%.
Idea Cellular is an Indian mobile operator and internet data provider company. Being a service based company it might face adversely by GST.
Company’s service revenue for the year ending March 31, 2014, was Rs. 261104 Million which increased to Rs 312,520 Million on March 31, 2015. Other operating income on March 31, 2014, was Rs 690.69 Million which declined to Rs 274.01 Million on March 31, 2015.
Other income of the company increased from Rs 2239.58 Million on March 31, 2014, to Rs 4523.37 Million on March 31, 2015. Total income of the company rose from Rs 264037.27 Million to Rs 317318.08 Million in the same period.
The share prices of Idea Cellular is trending down. On the breach of 93 levels will give next support at 86 levels and then 72 levels. On the upside it may move in 107 levels to 114 levels zone from where again selling may be seen.
Bharti Airtel is an another Indian telecom company which has its operation across 18 countries. Services taxes after implementing GST will be higher.
So revenue from Indian operation may get adversely affected of the Airtel. Revenue of the company was found increasing from financial year ended 2014 to 2015.
Service revenue was Rs 499127 Million in the year ended March 31, 2014, which increased to Rs 554868 Million in the year ended March 31, 2015. Sales have also increased from Rs 58 Million to Rs 96 Million.
Revenue of the operations was Rs 499185 Million which became Rs 554964 Million in FY 2015. Other income rose from Rs 8534 Million to Rs 51930 Million during the same period.
Technically Bharti Airtel may resist strongly in the zone of 350 levels to 380 levels. Only above 380 levels any buying is expected on the other hand post correction it may see some buying from below 300 levels, may be from 280 levels.
Suzlon Energy Ltd is one of the leading renewable energy solution providers in the world and formally it was ranked fifth in the world. It is one of the world’s largest wind turbine suppliers.
Suzlon has the presence in 19 countries. The revenue has decreased to Rs 2261.49 Crore in FY 2015 as compared to Rs 3036.36 Crore in FY 2014.
The main source of revenue is the sale of the turbine and other components which declined from Rs 2364.13 Crore to Rs 2254.18 Crore during the same period.
Suzlon Energy is in the downtrend and moreover, it is the sector which will be negatively affected by GST.
From current level, the stock finds support at 12 level and then 10 levels. On the upper side, resistance is at 18 levels and then 21 levels.
Alkem Laboratories is a leading pharmaceutical company which markets its products in fifty-five countries. It has total 16 manufacturing facilities among two of them in U.S.
The revenue of the company has increased from the year ended March 31, 2015, to year ended March 31, 2016. Revenue from operation in 2015 was Rs 32540.7 Million which rose to Rs 40633 Million in the year ended March 31, 2106.
Other income of the company decreased from Rs 1821.3 Million (on March 31, 2015) to Rs 1605.2 Million rupees on March 31, 2016.
Technically it is in an uptrend and only sustaining above 1600 levels it may rally further. The probability seems to be low due to the negative effect of GST. Above 1600 levels resistance is at 1675 levels.
The share price of this Indian stocks will seek any correction only sustaining below 1460 levels. It has major support at 1350 and 1270 levels below it.
Cipla Ltd is an Indian pharmaceutical company with global presence. It has the geographical presence in South Africa, North America, Europe and some other countries.
As the Pharma sector is expected to be negatively affected by GST due to the expectation of rising in indirect taxes paid which may increase by 60 percent and the products’ MRP by four percent.
Revenue of the Company has decreased to Rs 4910.40 Crore in FY 2015 as compared to Rs 5149.88 Crore FY 2014. Other income of the company was also found decreasing in the same year ended. It decreased from Rs 280.28 Crore to Rs 147.91 Crore in the same year ended.
Technically the company is in the uptrend and only above 588 levels it may see the strong rally for 650 to 690 levels zone. However, any correction in the share price may be seen due to the adverse effect of GST below 560 levels.
This Indian stocks have good support at 510 levels and then at 430 levels.
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