Nifty Fut(Dec):Has To Break Above 8000-8055 For 8345-8405; Otherwise Expect 7725-7680 Again (GST Or No GST)

Despite "Chai-pe-Charcha" (Tea Party Discussions),  

GST may not be an one sided smooth affair.

Eventually, GST may be passed, but after more "drama" amid "Intolerance" politics  !!

Trading Levels (NIFTY FUT-DEC)

SGX-NF: 7957 (LTP)

NSE-NF: 7976 (LTP)

	SL (+/-) 10 POINTS	FROM SLR
For	Intraday Swing	Trader
			T1	T2	T3	T4	T5	SLR
Strong >	8000		8027-55*	8105-165	8185-250	8305-345*	8365-405	<7980
Weak <	7980		7949-915*	7878-838	7796-725	7705-680*	7630-540	>8000
FOR	Conservative	Positional	Trader
			T1	T2	T3	T4	T5	SLR
Strong >	8000		8055*	8165	8250	8345*	8405-35	<7980
Weak <	7980		7915*	7838	7725	7680*	7540-05	>7770

Apart from India's Q2 GDP, RBI & ECB policy meet, US NFP data this week etc (total 42 major/minor global events !!) and all important Dec-16 Fed meet, all eyes will be on political front for passage of GST in the current winter session of our Parliament.

As expected, NAMO invited the Cong leaders for a discussions on GST and passage for it after Bihar debacle and subsequent back-door negotiations with Cong and other important political opponents.

Although, it appears that BJP breaks the "ice" with Cong leadership on GST, but some "chill" may still be there !!

The Friday's 45-minute meeting at PMO residence did not result any immediate breakthrough. Both the parties (Cong & BJP) has discussed their own specific points regarding the GST with each other and will meet again (possibly by 2-nd WK of Dec), after their own internal party meetings / final decision/ political strategy.

Now Cong, the "architecture" of the "Indian version of GST" has three specific points: 

1.  18% cap on the rate of GST : Govt (BJP) is not very comfortable with it, because its far below the "revenue neutral" rate, which is at around 23-25% at present. Govt may like the GST rate to be around 20-23% and may not be in a position for any significant compromise on the net revenue front for the sake of reform, because of fiscal discipline and also there will be 7-th Pay Comm & OROP pressure in the coming months. Ultimately, GST may be passed with open ended rate for the time being and the same will be decided by March'16 (Budget session of Parliament) by way of referring it to a panel of experts. As India is mainly a "service industry" oriented economy, any GST rate significantly higher to the existing service tax rate (14.5%) may also be seen as politically unpopular and may also cause unintended inflation in the underlying economy.
2. GST dispute settlement authority: Govt has explained the practical problem for this to the Cong leadership and this may not be a big prestige issue for Cong also in the final negotiation. 
3. Scrapping of 1% additional GST for MFG/producer states : Although BJP states like GJ & MH will benefit most, majority of the other states are also in favour of it because of net revenue factor. This may be a politically tough decision for Cong also. 

Clearly, the back-door discussions are progressing, but each party is quite conscious of its own "political image & mileage" and will not let each other so easily to get the full credit of the passage of GST. 

Thus this GST passage is turning into a major "political game" for both the parties (Cong & BJP) and also with others (TMC/AIDMK/JD-U/SP/BSP etc). All will try to act in its own interest for the sake of passage for it and will try to take credits for it as the public support for GST may be on the rise. Also there is great pressure on Cong from the industry body and investors (FII/DII) to act in favour of GST this time after last Parliament "wash out" fiasco in the monsoon session.

There is a great possibility that GST may be passed in any form in the current Winter session of Parliament, which is scheduled to end on 23-rd Dec. So, by Christmas day, we may get a "Santa Claus" gift from our political system in the form of GST.

But this may be not be a one sided smooth affair. Each party will try to take of its own advantage & political mileage out of the present situation. 

After Bihar debacle, BJP is now in some type of political back foot and even praising previous Cong PM for "Good Constitution" and seeking "consensus" from all political parties/oppositions for good governance (passage of key reform bills in RS), instead of "arrogance of  majority".   

Cong & other "united" oppositions may raise the "intolerance" issues vigorously amid absence of PM in the Parliament (who is now in Paris for "Climate Talk") and will make sure that the "issue of development" does not belong to a particular party (BJP). So, until the 2-nd Week of Dec, we may see various dramas in the Parliament and at the end an "exciting T-20 match" for passage of the GST in the 3-rd WK only.

Technically, NF has to sustain over 8055 zone for upper targets up to 8250-8345-8405; otherwise, it may fall again towards 7725-7680 zone.

Any fall towards 7725-7680 or even 7540 zone may be utilized for value buying (until 7500 area holds in the near term) as GST will likely to be passed before "Christmas Holiday" after various dramas & political negotiations. This time, this may not be a complete "intolerance wash out" for the Parliament.

Also, Fed may not be overly hawkish on Dec-16 with "no lift off" at all  and ECB may "do what ever is required" for stimulation of EU economy. Any major "China" crash may again help Fed this time !!

After all, Fed may not prefer for any lift off at "year end" time to spoil the "party", specially, when $ is significantly strong because of apparent policy divergence between Fed & ECB. 

In any way, a token "one & off" Fed lift off may also be priced in to a great extent by the market and even if Fed choose to hike by 0.25-0.50% on Dec-16, we may see $ selling after a whipsaw movement, considering the current strength of the same (i.e. another major "buy on rumour and sell on news" event).

Thus, buy on any major "intolerance"/ "China"/ "Fed" dips may not be a bad idea for a surprise "Santa Claus gift" in the form of GST passage & not so hawkish FOMC.

Analytical Charts: