** India reducing tax on all medicines from 12% to 5% is a positive move for pharma firms, enabling lower prices and boosting margins by 1%–2%, CLSA notes

** CLSA identifies Torrent Pharma TORP.NS, Abbott India ABOT.NS, Cipla CIPL.NS, Zydus ZYDU.NS, Lupin LUPN.NS and Sun Pharma SUN.NS as key beneficiaries

** All shares currently trading flat

** Medical equipment such as diagnostic kits, blood glucose monitors, surgical devices and bandages will be taxed at 5% from 12% earlier

** CLSA says cut will be positive for diagnostics chains like Dr Lal Pathlabs DLPA.NS, also marginally positive for hospital chains; CLSA's top pick is Apollo Hospitals APLH.NS

** DLPA, APLH rise 1.2% and 1.8%, respectively

** YTD, all stocks rise except Lupin and Sun, which have fallen ~18% and 16.7%, respectively vs pharma index's .NIPHARM 6.5% decline

(Reporting by Urvi Dugar)

((UrviManoj.Dugar@thomsonreuters.com))