The removal of surcharge on tea and duty on vanaspati and refined edible oils will have amarginally positive impact on companies like Tata Tea, HLL and Marico.
The focus on replantation and rejuvenation of tea plantations will benefit the sector over thelong term, but there is nothing material in it for companies immediately.
Implementation of VAT is a positive move over the long term. This is likely to pave the way for asingular tax going forward, which will help companies cut costs ands become more competitivein the long run.
Reduction in duty on refrigerated vans will give a boost to the processed food industry. Apositive for players like Amul, Nestle, HLL and Britannia.
Area specific excise exemptions for North East, J&K, Himachal Pradesh will continue toencourage FMCG companies to relocate to these areas.
The corporate tax rate change is unlikely to benefit the FMCG companies much, as most payan effective tax rate of less than 30% anyway.
The push to agriculture and rural India is likely to aid rural India's development in the long run. Ithas the potential to induce increased usage of FMCG products going forward. Individual taxbenefits too are a positive for the sector.
Some critical news:Outlook Of Investors(list major investors,FII etc.)
In the context of the positives and the negatives, investing in FMCG stocks is a tricky prospect.Given this, one has to be active with FMCG stocks and should book profits as soon as thetargetted returns are reached. Unlike earlier times, nowadays, one cannot afford to buy anFMCG stock and forget about it for a long time.It is unlikely that the government's initiatives will boost the sector overnight. The ongoing price wars mean that company earnings will continue to be volatile. Hence, in the shortterm, one should look at individual companies' prospects rather than the overall sector's prospects. This means that it is better to leave mutual funds that concentrate on FMCGcompanies and instead buy shares depending upon the company.It is not necessary that an MNC will be better than an Indian company. One should look ata company's profile and analyse its prospects before investing in its shares.It is not that you will lose out by buying FMCG stocks. But, in buying an FMCG stock, itwill be ideal to cash in during short bursts of activity.
Major Merger and Acquisitions in the past two years: