Logistics companies rally on GST passage hopes

Logistics companies have rallied in a weak market late last week as the BJP's win in Assam and gains in vote share in other states have bolstered hopes of the passage of the much-awaited Goods and Services Tax bill in the monsoon session of Parliament. In the last two sessions of the market, shares of Patel Integrated Logistics and Allcargo Logistics gained around 8% each. Gati gained the most, rising nearly 11%. Snowman Logistics and VRL Logistics gained 1.4% and 2.1% respectively. However, the low delivery volumes, in the range of 16% to 47%, indicate the speculative nature of the upswing in these stocks. The delivery volumes in these stocks were lower than the average delivery volumes of 21% to 53% during the last six months. "These are just momentum trades. If investors go and buy logistics stocks solely based on this event they could lose money as well as hope of GST being passed has been there for many years," said Sadanand Shetty, senior fund manager, Taurus Mutual Fund. Market participants said the euphoria is these stocks could fizzle out soon as the BJP's performance in the assembly elections will not do much to aid the passage of the GST bill. In a note to clients, CLSA on Friday said the House math to enable the GST's passage is still tough as it remains hinged on the Congress party's approval. "I don't expect a re-rating to happen in these stocks. The possibility of GST coming has led to some excitement and those who have missed the initial rally may jump to buy these stocks but eventually investors will scrutinise and profit booking will happen," said Phani Sekhar, fund manager-PMS, Karvy Stock Broking. The GST bill, which has received the Lok Sabha's approval, is pending in the Rajya Sabha due to opposition by the Congress over some proposals.