Nifty Dropped By Another 23 Points To Close Around Four Months Low On Nervousness About US Election Outcome & Tepid Domestic Cues Ahead Of Crucial GST Meet

Market Wrap: 03/11/2016 (16:30)

Nifty Fut (Nov) today closed around 8519, almost flat (-0.27%) after making an opening day low of 8505 and session high 8566 after a choppy day of trading. But more selling was visible in some of the selective scrips, especially midcaps after a significant rally for the last few months.

Time & price action suggests that for tomorrow (04/11/2016), NF has to sustain above 8480-8450* area; otherwise it may fall further towards 8405*-8360-8265 & 8205-8150*-8040 zone in the immediate to short term.

On the other side, for any strength, NF need to trade above 8545-8575* area for further bounce back towards 8610-8650/8675*-8705/8725 & 8750/8800-8840/8870-8905/8975 zone in the immediate to short term.

Indian market today opened lower amid ongoing US Election jitters coupled with fall in oil and diminishing hope of any immediate rating upgrade (India) by the global rating agencies (S&P, Moody’s, Fitch), despite best effort by the Govt.

Despite yesterday’s “hawkish/owlish” Fed outlook and high probability rate hike in Dec’16, USD was under pressure as the market sentiment is now primarily being driven by the US politics.

But, later in the day, UK High Court ruled that for invocation of Article-50, Britain needs to get Parliament approval and that helped to improve the “risk on” sentiment by some extent globally, although being at the fag end, Indian market was not able to show any positive reaction.

Although, HC gave ruling against Brexit without any parliament approval, UK Govt has decided to appeal the same in the Supreme Court and also announced that invocation of Article-50 is on schedule (March’17). The SC hearing will be done in Dec’16. 

All these may actually delay the Brexit process and the uncertainty will be there for foreseeable future. It may also allow more time for the UK Govt and the Brexit supporters to think more about the possible Brexit implications on the UK economy and finally decide for the “official divorce”. So eventually, “Brexit is a Brexit” may not hold.

Amidst all these global jitters, Indian market was also under pressure because of rating agencies refusal for any immediate rating hike and India may have to wait another two years for the same.

Among all these, there was another market buzz that CBEC officials are not so confident about April’17 roll out of GST and they are looking for mid-year, which may further damaged the Indian market sentiment today.

Clearly FII (s) are in selling mode for the last few weeks as the USD is going higher irrespective of Clinton or Trump being the next US Prez. If Clinton wins, then Fed has to hike with an accommodative stance and if Trump wins, then he may try for some unusual fiscal & structural measures to win back the confidence of the ‘Real Street”, which may be also good for USD and Fed has to hike more rapidly to counter any incremental inflation. Thus, both will be good for USDINR and it seems that, FPI (s) are taking pre-cautionary measures as a sudden devaluation of INR may be bad for their portfolio.

After market hours, GST council officially announced the final proposed multiple rates at 5/12/18/28 (%) with another rate for tobacco at 65% (sin tax??). Although the slab of 28% is not finalized yet for lack of consensus, various multiple rates along with cess to meet the probable revenue deficit of around Rs.50000 cr in the first year may be counterproductive for the basic aim of GST (ONE NATION ONE TAX) and it may also jeopardize the aim of boosting GDP by 1.5% as was highly expected. GST compliance may be more complicated and difficult under multiple tax slabs with many riders.

Clearly, Govt’s intention of not putting any extra indirect burdens on people/economy and at the same time will not incur any revenue loss can’t hold altogether. Either has to be compromised and in the proposed GST structure, there may not be any practical difference with the present system of VAT. Thus, political impulsion may be getting priority in setting the GST, which may do more chaos & confusion for the overall indirect taxation system, if implemented in a hurry. Average (weighted) GST rate may be around 22%, which is much higher than the earlier expected RNR of 18%.

SGX-NF