Indian equity markets have shown strong resilience to global turmoil (including Brexit recently) and the NSE Nifty-50 has gained over 7 per cent in 2016 so far.
Session opens on July 18 This is attributable not only to favourable and improving macroeconomic conditions of Indian economy compared to other emerging markets but also hopes of key reforms to be implemented by the government — the biggest of all being the passage of Goods and Service Tax Bill. While it has been passed in the Lok Sabha, it now has to be passed in Rajya Sabha where NDA government does not have majority. Thus, hopes will be running high starting July 18 when the monsoon session of the Parliament opens.
While market analysts believe that probability of GST Bill being passed is quite high, if the event does not happen then investors could get heavily disappointed and markets could correct to 8000-levels in the short term.
“It’s being taken for granted that GST Bill will go through. My expectations are that GST Bill should go through sometime in August. However, best of news is already priced in and I am advising to book profits at every rise, said Ambareesh Baliga, a market veteran working as an independent analyst.
“I see Nifty falling to 8,100 levels if GST Bill is not passed. However, even if it is passed I see a pause as investors will look forward to the implementation and the GST rate,” said a fund manager who did not wish to be quoted.
Temporary setback However, the correction would not last long as central banks globally are likely to be in the pumping money mood due to global slowdown risk post the Brexit. Due to strong macro economic situation compared to peers, Indian markets have been holding up despite Brexit. Foreign institutional investors have pumped in net ₹3,000-odd crore in July so far (post Brexit), close to the levels seen in May. Also, a lot of other factors such as earnings season and monsoon update will also have a greater bearing.
Brokerage preview notes on first quarter performance of current fiscalindicate it will be a good one with less scope for disappointment. “We are not buying because of GST. We are buying because corporate are doing well in India,” said Ramdeo Agarwal, Joint Managing Director, Motilal Oswal.
Monsoon angle The critical June-September monsoon season is likely to 6-9 per cent above normal according to private as well public weather forecasting agencies. So the three factors namely liquidity driven rally, better earnings season and good monsoons will douse any disappointment coming from failure to pass GST in the short-term.