Consumer durable stocks worst performers, govt to blame; PC Jeweller, Titan, Voltas, Blue Star on hotbed

As the benchmark Sensex index tumbled by more than 100 points in today’s trading session, it was consumer durable stocks that turned out to be worst performers. The S&P BSE Consumer Durables index was trading at 18,783.99 down by 350.29 points or 1.83%. All major stocks like PC Jeweller, Rajesh Exports, Voltas, Blue Star, Titan and VIP Industries were trading in negative zone. The reason why investors have lost faith in this index, is because of import duty hike ordered by government on a list of 19 items. These products have seen a big hike in the duty that will be imposed on them and this will impact the sector negatively. 

Among losers list, PC Jeweller took lead by tumbling 7.56% trading at Rs 57.50 per piece. The company was followed by Rajesh Exports at Rs 655.55 per piece below 4.45%, VIP Industries at Rs 395 per piece down by 4.53%. 

Other stocks which were trading in red were Crompton Greaves at Rs 216.90 per piece down 2.93%, Blue Star at Rs 550 per piece down 2.85%, Symphony at Rs 947 per piece down 2.78%, TTK Prestige at Rs 6212.35 per piece down 2.58% and Titan at Rs 793.90 per piece down 1.44%. 

Companies like Voltas and WhirlPool tumbled below 1% each trading at Rs 525 per piece and Rs 1325.90 per piece respectively. 

In order to control widening CAD and depreciating rupee, the government has hiked import duty on some 19 items. These products accounted for an import bill of approximately Rs 86,000 crore in FY18 by 2.5-10% points. 

Starting with electronic items - the Air conditioners, Household Refrigerators and Washing machines less than 10 Kg has seen rise from 10% to 20% in  their custom duty. While, compressor for air conditioners and refrigerators has seen increase to 10% from 7.5%. 

Items like speakers, radial Car tyres, bath, shower bath, sink, wash basin, etc. of plastics has seen their custom duty now at 15% from 10%. Also, articles of plastic for conveyance and packing such as boxes, case, containers, bottles, insulated ware etc. Further,  trunks, suitcases, executive cases, briefcases, travel bags and other bags have seen a hike in their custom duty to 15% from 10%. Similar hikes were also made in miscellaneous items of plastics such as office stationery, fitting for furniture’s, decorative Sheets, statuettes, beads, bangles etc.

While no hike in gold import duty has been imposed, however, the government hiked import duties on diamond related products. 

Non industrial diamond (other than rough diamonds), i.e., cut and polished diamond have now import duty of 7.5% from previous 5%. Similar rates are on diamonds-semi processed, half cut or broken, and also lab grown diamonds. 

Going ahead, import duty of cut and polished coloured gemstones were also hiked to 7.5% from previous 5%. 

Import duty on articles of jewellery and parts thereof, of precious metals or of metal cladding with precious metal - and - articles of Goldsmith or silversmith wares and parts thereof of precious metal or of metal clad with precious metal saw hike to 20% from previous 15%. 

Moreover, footwear items was also not left, as now their import duty stands at 25% from previous 20%. Interestingly, government also hiked import duty on aviation turbine fuel (ATF) to 5% from previous 0%. 

In Care Ratings view, while the rate hike was important in order to narrow down the current account deficit and bring the domestic manufacturing industry at par with the international markets post GST, the timing of the hike will have a major impact on the durables industry with the festive season just around the corner.