Markets may see some recovery, GST rate specific actions to be in limelight

The Indian markets reeling under global pressure slumped and major benchmarks dropped close to a percent in the last session. Today, the start is likely to be mildly in green and some recovery can be seen after the sharp fall of last trade. Traders will be cheering the GST Council finalising tax rates of goods and services under the four-slab structure with essential items of daily use being kept in the lowest bracket of 5 percent. The Council fixed the rates for over 1200 items under the Goods and Services tax. Lots of daily consumption items such as milk, fruit and vegetables, jaggery or gur, foodgrain and cereals have been exempted from tax, while others such as sugar, tea, coffee, edible oil, mithai, and newsprint have been placed in the lowest slab of 5 per cent.  Luxury cars will attract 28 per cent GST plus a cess of 15 per cent, while small petrol cars will face 28 per cent plus 1 per cent cess, and diesel small cars 28 per cent tax plus 3 per cent cess. Consumer durables, which now face a total tax of about 32 per cent, will be taxed in the 28 per cent slab. The panel will discuss tax rates for gold and some other items today and could meet one more time if necessary to decide rates on remaining items. There will be sector specific buzz based on GST rates and steel stocks may see some uptrend as the GST rate on coal has been fixed at 5 percent. The move will bring down the input cost and would lead to stabilisation of prices. There will be some buzz in banking sector too, as the RBI has eased the norms of setting up bank branches and said branches manned by either bank’s staff or its business correspondents where services are provided for a minimum of four hours per day for at least five days a week will be called a banking outlet. There will be lots of important earnings announcements too to keep the markets in action.

The US markets bounced back in last session and the major averages partly offset the steep losses posted in the previous session. Bargain hunting mainly contributed to the strength and also the release of some upbeat economic data, including a report from the Labor Department showing another unexpected drop in initial jobless claims. The Asian markets though have made a mixed start and some indices are again in red heading for the biggest weekly drop since March. Japanese market too was trading cautiously as the yen headed for its strongest week in a month.

Back home, snapping the record-setting spree, Indian equity benchmarks ended the daunting day of trade with a cut of around a percent, with frontline gauges settling below their crucial 30,500 (Sensex) and 9,450 (Nifty) levels amid selloff as political turmoil in White House spooked investors and dragged the global markets. Major bourses traded in red terrain throughout the session, as traders remained on sidelines eyeing two-day Goods and Services Tax (GST) Council meet beginning in Srinagar, which will see participation from 29 states and union territories, along with Jaitley, and senior officials from the revenue department. In the meeting Finance Ministry Arun Jaitley is likely to finalise the rates that various goods and services will attract from July 1. Meanwhile, the GST Council approved all nine rules for the rollout of the new indirect tax regime. The nine rules finalized by the council pertain to composition, valuation, transition, input tax credit, invoice, payment, refund, registration and return. Market participants failed to get any sense of relief with Commerce and Industry Minister Nirmala Sitharaman’s statement that India’s exports have been increasing despite global headwinds and efforts are being made to neutralise any impact on them due to implementation of GST. Traders also overlooked a senior UN economic official’s statement that the demonetisation policy is not expected to have a long term impact on domestic demand in India, which is projected to clock a 7.9 percent growth in fiscal 2018. Selling intensified in last leg of trade with European markets making a somber start as mounting political uncertainty in the U.S. exacerbated concerns among investors as to whether President Donald Trump would be able to deliver on key pro-growth policies. Asian markets too traded weak and ended mostly in red on Thursday. Finally, the BSE Sensex lost 223.98 points or 0.73% to 30,434.79, while the CNX Nifty was down by 96.30 points or 1.01% to 9,429.45.