Nifty Fut (June) closed the July series around
8667 and its the best series (for long side) after March'16,
despite fatal combination of Brexit & Rexit, which did not
last even 24 hours amid powers of central banks liquidity.
Technically, NF (Aug-CMP:8698) has to sustain
above 8725*-8785 zone for an immediate target of 8825-8875* and
8930-9015* & 9050-9200* in the short term.
On the other side, sustaining below 8665 area,
NF may fall towards 8605-8565* and 8505-8465* & 8400-8290*
zone in the days ahead.
Apart from supportive global cues, Indian market
also got immense support from the ongoing hopes of GST passage
(60% probability this time as par Nomura), forecast of above
normal monsoon (though IMD yesterday downgraded/reviewed it normal
as par LPA and "not above"), market/Govt friendly new RBI Gov, hopes
for more monetary stimulus (rate cuts), good sets of Q1FY17 result
(15-20% EPS growth in FY-17) and incremental economic
reforms/policy measures by the Govt.
Now, after yesterday's cabinet approval of some
of the GST amendments/demands sought by the opposition/various
states/regional parties (waiver of 1% manufacturing tax and GST
redressal mechanism), hopes are very high that the Govt may table
it in the RS for debate & passage as early as tomorrow to the
last day of the session (12-th Aug).
The main contention is now the GST rate----will
it be 18% or revenue neutral between 25-27% ? Present effective
indirect tax rate is around 30%. Interestingly, no states or even
centre is ready to loose any revenue.
As par present RS math, without Cong's direct or
indirect support, it may be very tough to pass the GST bill in the
RS. Also, AIDMK & BSP may not support it directly.
As par Cong leadership, they will examine the
official GST draft amendment and then decide on the GST rate. As
par Kerala FM, if GST is not passed this time, then it will have
to pass in 2020 (after 2019 general election).
Also some political parties/states are concerned over state's right to impose any tax of its own and state's dependence on the centre for it. So there will be some question of centre-state relationship also, which is not covered in the GST draft.
Any GST rate higher than 20% may also encourage non-compliance and cash transactions.
In any way, even if the GST is passed this time,
it may not be implemented in reality until 2019 election as
considerable time will be taken in passing through various state
assemblies and various legislations. Also, IT infra need to be
prepared/upgraded for the industry & business, specially SMES
and small business owners.
So, in that sense, mere passage of GST may be an
immediate driver for Indian market, but may not be a game changer
in the near term. Market will concentrate on the earnings, RBI
rate cuts/tones and other macros along with global triggers.
Passage of GST may drive the Nifty towards
8875 zone (if sustained over 8725-8785) and after that we may
see some long unwinding also, as this news flow of GST passage
may be already discounted by our market to a large extent.
Globally, yesterday Fed was basically a
"non-event". Although Fed tried to script some hawkish tone for
Sep'16 hike probability, market is now convinced that Fed will do
nothing until Dec'16 (after US election in Nov). Moreover, if
Trump win US presidential election this time, then Fed may also
forced to do be in the sideline till foreseeable future as it may
be another Brexit like panic in the global financial market.
All eyes will be on BOJ announcement tomorrow
morning and expectation is quite high around 30 tln Yen QQE from
Kuroda & Co. But, one thing is sure that anything below 20 tln
Yen may cause severe USDJPY selling and risk trade may be "off"
for quite a time.
Article Courtesy: Frontiza.com
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