Nifty drops by 1% as market got a feeling that the current GST amendment bill may be only the 1-st innings of a long 5 year test match and not a T-20 match

Nifty Fut (Aug) today closed around 8575, around the day low (8568) and nearly 75 points down from the day high of 8649.

Technically, now sustaining below 8540 zone, NF may target 8480/8460*-8330-8270 and 8150-8000*-7925 zone in the next few days.

On the other side, for any strength NF need to stay above 8635 for any rally up to 8675*-8735-8775* and 8825-8875*-8925 in the immediate to short term.

Today, the global morning cues was subdued after overnight US market selling amid plunge of oil and fear of Italian banking crisis. In the early Asian session, Japan MOF did some jawboning in order to prevent the USDJPY to fall below 100 key level (now almost psychological) and succeeded by some extent.

All the eyes will be on today's US data (ADP/ISM Non mfg) and tomorrow's BOE rate decision and Friday's US NFP job data. Market will keenly watch the BOE's statement & out look of the UK economy post Brexit uncertainty. 

Expectation that BOE will cut by 0.25%, but as par some reports, BOE may cut even by 0.50% to return to return to ZIRP this time. 

But as GBP is already down by more than 10% post Brexit, BOE's job may be already done without any real QQE. So, BOE can stay pat and that will help to depress the USD and consequently USDJPY may broke 100 level. Thus, in the scenario of below expected US data and neutral BOE, risk trade may be "off" for some time.

Today, our RS started the much awaited GST amendments bill debate and its beyond any doubt that RS will pass the same by tonight this time as almost all the political parties except AIDMK (?) will vote in its favour.

But this is a already known factor and what the market is keen to know that the effective finalized GST rate & the time frame of the implementation of the same (2017-18 or after 2019) ?

From the overall tone of the different political parties so far, it seemed that the debate of GST rate is far from over. Although there is a talk of 18% standard rate (revenue neutral rate- RNR), 12% for essential items and 40% for premium goods/sin tax (expensive car, branded garments and tobacco), as par the Kerala FM, most of the states are demanding above 20% (22.5%) standard GST rate and both centre & states are not ready to sacrifice the present level of tax revenues as well !!

Anything above 20% may be negative for our economy and market as well. An ideal GST should be in the concept of "one India & one tax" and not the multiple levels of taxes we are hearing now. It should also incorporate all the "goods & services" including petro & alcohol products; otherwise, what will be use for such massive tax reform in the name of the GST ?

As par former Cong FM, standard GST rate in the advanced economies is around 14.5%, while it is around 16.5% in the other EM(s).

Also there will be some questions of state's rights as par the present constitution of India after implementation of GST. States will have no right to put any taxes after GST.

As the TMC member today pointed out that the decade long GST battle is actually the "game of ping-pong" between BJP & Cong, but almost all the other parties may now joining in the same game with an eye to the next series of state elections as well as 2019 general election.

For BJP, this may be a political "trap" by the Cong to implement the GST within 2017-18, so that the likely inflationary effect may affect the NDA poll prospect in 2019 election. This may be one of the key reason for the Cong to extend "sudden" support to the Govt/BJP to pass the GST amendments at this point of time.

Thus it may be the time for BJP again to go slow and create an atmosphere, so that the GST can't be implemented before 2019 election.

Meanwhile, all the political parties, including BJP/Cong/TMC will take the credit for passage of the same "in the interest of the Nation above any politics" in the coming state & general election and BJP will not be allowed to take credit for the GST alone.

Thus, GST may be a true "political game" going on for the last ten years and may go on for the next five years also before actual roll out or implementation.

Market may soon find that there will be no immediate impact of GST on the overall macro economy and earnings of the corporates in the foreseeable future. 

Once the present GST hype is over sustaining below 8500 zone, market may correct towards 8000-7800 level and then concentrate on the core earnings, macros & global cues to move accordingly.

Update: GST Amendment bill is passed in the RS as expected---but as said its just a beginning and lots more has to come and April'17 deadline may turn out to be a good April fool joke.

As par Cong-GST stands for "Good Sense Triumphs" and as par TMC- "Go Slow Tactics"----TMC may be quite right.