Consumerism got a body blow on Friday when the LDF government imposed a ‘fat tax’ in its maiden budget, which is likely to be implemented by other State governments.
“The budget packed a punch on the fast-food culture, ostensibly to bring back our youngsters into the healthy ways of eating,” said George Muthoot, Director, Muthoot Pappachen Group.
There was an impact on some stocks of the companies involved in packed food items, “which is only a kneejerk reaction,” said Sudip Bandyopadhyay, Managing Director and CEO, Destimoney Securities. According to him these stock-specific moves are “only temporary.” Shares of quick service restaurants such as Jubilant FoodWorks and Westlife Development plunged after the budget.
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Jubilant FoodWorks which runs Domino’s Pizza plunged 3.63 per cent, while Westlife Development, the parent company of fast food multinational McDonald’s west and south India franchisees, dipped by 7.7 per cent. However, both these shares recovered at the end of the trade.
“Though much demand decline is unlikely as the products that have come under the higher tax bracket now largely caters to the upper crest, the tax hike on packaged wheat and basmati products could have some impact on FMCG or food sector stocks,” said Anand James, Chief Market Strategist, Geojit Securities.