Nifty at 9,700-mark: Where does the index go once GST comes in?

Indian markets have boomed to new high in past few weeks especially Nifty which has outperformed not only Sensex but also emerging markets. GST roll out is expected to Nifty between 9,800-10,000-level.

A view of National Stock Exchange head office. Photo: IANS

Counting of days have begun for the roll out of goods and service tax (GST) bill in India which is expected to be implemented by July 01, 2017.

The GST council last month had fixed goods and service tax rates for a total of 1,211 items under five brackets 0%, 5%, 12%, 18% and lastly 28%.

On hopes over GST roll out to multiply growth of Indian economy further, Indian markets have been on a booming level, Nifty on Tuesday earmarked another high by crossing over 9,700-mark.

Between April 2017 – till date, Sensex has given more than 5% return and has been trading near 31,000-mark.

At the same time, Nifty has outperformed Sensex, by giving nearly 6.27% return to its investors and has been trading between 9,600 – 9,700 levels respectively.

Both Sensex and Nifty are trading at a 5% premium to MSCI World Index and 40% premium to MSCI Emerging market Index with Nifty being a top performer globally.

In dollar terms, MSCI India has given a return of 36% on 5-year basis while MSCI-EM has given negative returns at 4%, on a YTD basis.

Finance Minister Arun Jaitley on Monday made it clear that GST is a simplified indirect tax regime and there is no reason to further postpone its targetted July date.

Now that GST is just few weeks away from its implementation, which level will Nifty reach once it comes out.

Anand James, Chief Market Strategist, Geojit Financial Services Ltd said, “There is no doubt that the idea of common market for goods & services that GST could bring about, is a growth multiplier. Industry participants are still in a state of flux, and uncertainty still prevails despite the clarifications on the headline rates . Very few firms are seen confidently admitting their preparedness towards a 1st July rollout."

James added, "This suggests that GST rollout is a potential disruptor, but it may be difficult to quantify short term impact of the fallout or how long or short it will take before the intended benefits are passed on.”

He further mentioned, “However such uncertainty is less likely to impact Nifty in big way and may at best lead to an extended period of consolidation, and corrections are less likely to chip away more than 5 percent, and near term objective of 10000 Nifty is fairly achievable.”

On the other analysts at InvesTreskk in its report stated that broader markets have gained strong momentum last week. Midcap Nifty looks set to retest and surpass its recent high of 4735. Despite several averages indicating an overbought condition, Nifty looks set to test its next target of 9850-9930 range in the week of GST roll out.”

Many analysts have said that markets will react positive with hopes that GST will boost the ease of doing business in India because it brings individually tax rates into a single tax module and will be a boon for many industries and business within the country.

To invest in equity markets, the important thing is "patience". So, if you are looking Nifty at 10,000-mark, the best way to reap such windfall gains is to stay invested. "More importantly, with interest rates flat, and gold glittering less, it is not as if we are flush with other investment choices," James added.