How to make profit from GST rates on Paints?

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Impact of the News

In 28th meeting of GST council Government has revised GST tax rates on Paints from 18% to 12%. This 6% rebate is very positive news for Paints sector. The Paints sector companies will get positive push from this fresh announcement.

As you may be aware there are mainly 4 companies in Paints Sector. You may have heard the names before. But let me list them for you.

  1. Asian paints
  2. Berger paints
  3. Kansai Nerolac
  4. Akzo Nobel

The news is positive for all the companies. Out of above 4 companies Kansai Nerolac and Akzo Nobel are foreign multi national companies. Asian Paints is the largest company based on Market cap and Profit out of above four.

Now you know the news is positive but how to make money from this positive news. We often miss the opportunity. This post helps you identify the opportunity and make money out of the news.

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How to make money from the news?

I will select Asian Paints out of these four companies. The reasons are listed below

  1. It has positive momentum
  2. It is making fresh high and trading near 52 week high
  3. The news will give fresh boost to it
  4. You can play all the trade options mentioned below with Asian Paints

I expect it to open gap up on Monday if global clues are fine and Nifty is not choppy. You can buy it on that day or following day once there is profit booking after rise on Monday. I am expecting 3% to 5% rise on Monday.

Option 1

The first option is safest for Beginners. You can buy Asian Paints in cash. The stock is stable and has given decent returns over the year. It is safe bet and you can hold it for long term. The GST rate revision will have positive impact on future results resulting in higher stock price

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Option 2

You can buy 1400 CE option (Call option of 1400 strike price) for July month and hold it for couple of days.

Note you can also play futures but since it is risky and not advisable for Beginners I have skipped it here. Options are also risky but loss is less compared to Futures.

Hope it helped you frame your trade on next week. You can also share your thoughts.

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