3 Stocks That Will Have A Make Or Break On Budget Day

As we head into the Budget day, there are three stocks that would remain exceedingly volatile. In fact, after and during the budget speech these stocks are likely to move up or down, depending on the announcement.

ITC, VST Industries and Godfrey Philips

The three companies are likely to see their shares being exceedingly volatile on budget day. This is because all three are cigarette and tobacco players. It will be important to see if the industry is spared of taxes, especially Sin Tax.

Tobacco products like Cigarettes are in the 28% GST slab, other than for tobacco leaves, which are taxed at 5%. Tobacco and its various forms are also subject to a heavy burden of cess, given that they are seen as sin goods. The cess is 65% on un-manufactured tobacco bearing a brand name.

Any tax increases directly or indirectly is to have a bearing on the stock prices.

VST Industries is a tobacco industry player more than 90 years. The company is the fastest growing cigarette company in the last half decade.

ITC is likely to be less volatile in terms of price movement in comparison to Godfrey Philips and VST Industries as the company is a diversified player also drawing significant revenues from FMCG, Hotels, Paper and Paper Boards etc.

If there are no taxes levied in the Union Budget on tobacco and ancillary products, be rest assured that the stock prices of these companies would climb.

However, given the government's severe financial constraints it would be interesting to see what happens to the Sin Tax.

Should you buy the stocks ahead of the Budget?

Ultimately it will be the fundamentals that matter. With the tax sword always hanging, a better bet would be ITC as it is more of a diversified player. We also like the ITC stock as its valuations are not very expensive.

The stock is also available at a dividend yield of almost 4.9%, which is not bad at all.

Disclaimer

Investing in equities is risky and investors must therefore understand the risk. The author and Greynium Information Technologies Pvt Ltd would not be responsible for any losses caused based on the article. The author and is family do not hold shares in Star Cement mentioned above.