GST Impact

Without GST	Particulars	With GST
Manufacturer to Wholeseller
5,000.00	Cost of Production	5,000.00
2,000.00	Profit Margin	2,000.00
7,000.00	Manufacturer Price	7,000.00
840.00	Excise Duty @ 12%	–
7,840.00	Total Value	7,000.00
980.00	VAT @ 12.5%	–
–	GST @ 18%	1,260.00
8,820.00	Bill Amount	8,260.00
Wholeseller to Retailer
7,840.00	Wholeseller Cost (With Excise)	7,000.00
784.00	Profit Margin @ 10%	700.00
8,624.00	Total Value	7,700.00
1,078.00	VAT @ 12.5%	–
–	GST @ 18%	1,386.00
9,702.00	Bill Amount	9,086.00
Retailer to Consumer
8,624.00	Cost to Retailer	7,700.00
862.40	Profit Margin @ 10%	770.00
9,486.40	Total Value	8,470.00
1,185.80	VAT @ 12.5%	–
–	GST @ 18%	1,524.00
10,672.20	Bill Amount	9,994.00

GST for Market

Most analysts suggest that from a macro-economic perspective, while the short-term impact of GST could be mixed, the long-term impact will be positive.

“Besides simplifying the indirect tax structure, GST should also help to create ‘One India’ by eliminating geographical fragmentation. It will remove the current cascading of taxes by ensuring the seamless flow of input credit across the value chain of both goods and services,” suggests a report from Nomura.

Indranil Pan, chief economist at IDFC Bank, on the other hand believes that while in the long-run GST will have a positive impact on inflation and government finances, in the near-term, inflation is likely to go up and government finances are likely to be strained due to compensation to states.

Here is a sector-wise snapshot excerpted from a recent Nomura report on GST on how the bill is likely to impact various sectors and stocks.

AUTOMOBILES

Largely positive for demand, as it will lead to a 10-17 per cent fall in prices, assuming an 18 per cent GST rate. Margin benefits to accrue for tractors, as these can claim set-off against taxes paid on input. Organized battery and other spares would become more cost competitive and gain market share.

Stock impact: Positive for Maruti Suzuki, Hero MotoCorp, Exide, Amara Raja, Eicher Motor, Mahindra & Mahindra, Bajaj Auto. Negative for Ashok Leyland

FMCG

GST will be positive for household and personal care space, as the effective tax rate reduces by 200-500 basis points (bps), apart from reducing warehousing and logistical requirements. However, working capital for retailers, and additional tax rates for jewellery and cigarette manufacturers are negatives.

Stock impact:  Positive for Hindustan Unilever, Emami, Godrej Consumer. Negative for Titan, Bata, ITC

LOGISTICS

Passage of GST will lead to elimination of central sales tax and inter-state value-added tax arbitrage possibilities. This will lead to consolidation of warehouses and increased efficiencies in the logistics chain.

Stock impact: Positive for Container Corporation of India, Adani SEZ, Gujarat Pipav Port (longer term)

INFRASTRUCTURE

Clarity on works contract taxation is the key benefit for the sector. This could reduce litigation, as it eliminates the difference between sales and services.

Stock impact:  Positive for Larsen & Toubro (L&T)

CONSUMER DURABLES

Consumer durables will benefit from improved logistics. Direct benefits up to 200-300 bps in cost savings may accrue. A significant portion of direct benefits will be passed on to end consumers because of a highly competitive market.

Stock impact: Positive for Voltas, Havells, Crompton Greaves

OIL & GAS

Key petroleum products like crude, natural gas, high speed diesel and ATF have been kept out of GST. Clarity is awaited for others. Compliance costs are likely to rise because of dual indirect tax mechanism.

Stock impact:  Neutral. Do not foresee any meaningful change on oil & gas companies

CEMENT

Overall tax incidence on the sector could decline. The sector will also benefit from expected decline in logistic costs. Firms can be expected to pass on the benefits, given that demand and plant utilization levels are picking up.

Stock impact:  Positive for most companies

WIND POWER

GST will be negative for wind, turbine generator manufactures like Suzlon and InoxWind, as pressure on developer margins and internal rates of return could eventually force reduction in prices and realizations, up to 10-13 per cent. However, if components are included in the exemption list, the impact of GST will be nullified.

Stock impact: Negative for Suzlon, Inox Wind

UTILITIES

Exclusion of “sale of electricity” from GST could potentially raise the cost of coal-fired and renewable energy for Discoms. Profitability of independent power producers selling via medium/long-term PPAs is unlikely to be dented as cost escalation would likely be passed on.

Stock impact:  Positive for CESC, negative for JSW Energy

PHARMACEUTICALS

GST rollout could be negative for the sector, as it is likely to increase indirect tax. Analysts say indirect taxes paid by pharma companies could increase by 60 per cent and MRP by four per cent.

Stock impact:  Negative for Alkem, Glaxo Pharma

Equity at Breakfast : Global clues driving market… Nifty near a short term support… strict stop loss your trades on either sides…

Yaadein : Nifty slipped further lower on Tuesday and lost over half a percent in an extremely volatile session. Initially, it ignored weak global cues and made a strong start, but it couldn’t hold that bias for long and resumed its declining spree as the session progressed. It clearly shows that global markets are currently dictating our market trend, in absence of any decisive cue from the local front.

Market Outlook for the day –Despite prevailing uncertainty, we suggest traders to uphold buy on dips in Nifty till it’s trading above 7650.

Corporate News –

• United Spirits rose 3.5% to Rs 2,442 after reports Diageo Plc is considering raising stake in the liquor maker to 72% from 54.78%.
• Rolta India jumped 11% to Rs 85.30 after the company won multi-year multi-million pound geographical information system contract from UK Power Networks.
• Godrej Consumer Products Ltd (GCPL) reported a 16.75% rise in consolidated net profit at Rs. 310.07 crore for the fourth quarter ended March 31, 2015-16. .
• BHEL announced the commissioning of a 600 MW coal-based thermal power plant in Madhya Pradesh.

Bindass Bol : “Sell in May and Go Away” or “Monsoon Momentum” will drive Indian markets in month of MAY. Indian Economic growth is making a comeback. India’s infrastructure output expanded at its fastest pace in 16 months in March as per new data. The theme in 2016 so far is Underperforming sectors are the New Performers. So, one week it was Cement, then one week Power, then one week Real Estate…now Fertilizers.

Global equity markets are giving mixed signal now on what may happen next. Don’t worry they give this kind of signal all the time. Fundamental concerns around Global growth are genuine. The Merchandise World Trade Monitor tracks global imports and exports in two measures: by volume and by unit price in US dollars. So far in 2016, world trade is down by 0.4% on a volume basis and down 3.8% in dollar terms. Trading is all about waiting for that right opportunity.

Waiting is the mantra. Remember, Opportunity does not travel on any schedule; you have to watch for it.

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p align=”justify”>The Resistance at 7973 now looks solid and robust for Nifty.  For today the support of Nifty spot is at 7700 (closing basis) –7650 (intraday basis) and resistance at 7820-7850. Bank Nifty futures support at 16300-16200 and resistance at 16700-16850.

Equity at Breakfast : No Hopes in Budget 2016 … But still Hopes …

Yaadein : In an eventful day, Nifty upheld its negative tone and lost over half a percent amid volatility. Participants were cautious from the beginning due to two important domestic events – F&O expiry and Railways Budget. Moreover, news of steep decline in China’s equity market pushed them completely on back-foot. Again, banking led the fall among the sectoral indices which later joined by others as the day progressed.

Market Outlook for the day –Amid all, we reiterate our negative stance and suggest upholding sell of rise in Nifty and stocks. For those who wish to carry their trades on overnight basis, it’s advisable to keep those positions hedged, considering the possibility of uneven price swings on Monday.

News –

• Railway Budget: The Union Railway Budget 2016-17 focused on capacity creation in the rail sector, with an increased outlay of about Rs. 1.21 lakh crore, and on completion of the ongoing projects rather than announcing new ones. Extending 2015’s measure, passenger fares remain the same. Mr. Suresh Prabhu’s announcements included India’s first rail auto hub, boost to e-catering, connectivity to North-East and Wi-Fi in railway stations.
• Coal India rose 1.7% to Rs 300 after railway minister Suresh Prabhu in the Railway Budget 2016-17, kept freight rates unchanged and also announced review of tariff policy.
• Reliance Capital said its board approved the transfer of its commercial finance division into a separate wholly-owned subsidiary.

Bindass Bol : Trading is not that easy now a days. Every tick on chart means different on different part of the day.

Today NF if trades above 7071 then will rally towards 7099-7107. Thereafter 7127 will act as string resistance, if able to cross and sustain above it for 30 min then will rally towards 7183-7201. Crucial support will be at 6970-6946 as last hope.

BNF will face resistance at 13744-13832 . If able to cross it and sustain for 20 min then will see some fireworks. Support at 13568.

Equity at Breakfast : Monday very crucial… Don’t leverage…exit at every rise… next week expect bottoming… but before that more deep cuts expected…

Yaadein : Once again, the opening move of Nifty index was narrated by international markets. US stock markets settled after losing 3.5% on Yesterday, in response to this our domestic markets opened weak with a gap of 100 points on the down side. Later, as the day progressed, the entire down side gap was filled and Nifty settled marginally in red.

Market Outlook for the day – Nifty index is trading in range 7450-7600 levels from past four trading sessions. We believe, the ongoing volatility will continue till this range is breached and sustained on closing basis.

Corporate News –

• Infosys’ consolidated net profit as per the IFRS rose 2% to Rs 3465 crore on 1.7% rise in revenue to Rs 15902 crore in Q3 December 2015 over Q2 September 2015. Infosys increased its full year revenue growth guidance in dollar terms and now expects its revenue to grow 8.9% to 9.3% in dollar terms for the year ending 31 March 2016.
• Everest Industries net profit jumped 142.1% to Rs 2.76 crore on 1.7% rise in net sales to Rs 278.89 crore in Q3 December 2015 over Q3 December 2014.

Bindass Bol : Nifty futures support at 7535-7525 breaking it will slide towards 7494-7463-7453. Resistance at 7569 above it if sustains for 20 min then 7589-7617-7624 in coming sessions.

Bank nifty futures crucial support at 15450 if breaks and sustain for 20 min then will open gates for 14765. Else will bounce from here for a small relief rally towards 16000-16100

We can see a bounce from support levels but one should use the opportunity to exit or hedge long positions. Sunday Iran is expected to come out of BAN and its crude supply will come in market, which will decide further crude rallies. Crude will settle down next week after that only we can expect bottoming of the market. Till then don’t leverage and exit where ever possible.

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Equity at Breakfast : Trend UP… with cautious approach rise the trend.

Yaadein : Extending its prevailing bias, Nifty started on strong note and ended with gain of nearly a percent on Monday. Participants upheld their optimistic view despite mixed domestic cues and accumulated quality stocks from across the board. Among the sectoral gainers, healthcare and utilities topped the table, closely followed by auto, banking pack

Market Outlook for the day – Nifty has almost reached to our immediate target of 8000 so traders should now uphold positive yet cautious approach.

News –

• Sunil Hitech Engineers won a project worth Rs 83 crore for construction of low cost housing in Jharkhand.
• Allcargo Logistics has fixed 31 December 2015 as record date for the purpose of 1:1 bonus issue of shares.
• Tube Investments of India rose 11.6% to Rs 446.60 after the company said it will sell 14% of Cholamandalam MS General Insurance to its joint venture partner Mitsui Sumitomo Insurance Company of Japan for Rs 882.67 crore.

Bindass Bol : In last post had warned of upcoming risk of SG-RG court case in case they don’t take bail as per media news and also mentioned that if that doesnt happen and harsh decision doesn’t come then market will rise from Monday. We have seen a rally since last Monday onwards.

Nifty futures above 7921 if sustains for 20 min then 7937-7958. The 7958 will be crucial level to watch if cross and sustain then will see 8006-80353 if not able to sustain then wil slide towards 7850

Bank Nifty futures will create the next trend. If ablve to cross and sustain above 16979 for 20 min then will see upside towards 17235-17320. If not able to sustain then will come down to 16610 lvels in coming 1-2 sessions.

Equity at Breakfast : FED decision Positive but forthcoming Political Drama Very Negative. Be Alert with strict stop loss. Book Profits where ever u get or hedge long positions till monday.

Yaadein : Nifty managed to end in green for third day in a row on yesterday; thanks to firm global cues and recovery in index majors across the board. After gap up start, it gradually inched higher but failed to surpass the crucial hurdle around 7785 level and traded range bound in later part of the session. Mostly sectoral indices traded with positive bias but participation from the banking pack, which was missing on Tuesday, played vital role and aided Nifty to sustain at higher levels.

Market Outlook for the day – We’ll be seeing the impact of US Fed meeting outcome in early trade on Today.

Corporate News –

• The Supreme court reportedly imposed a ban on registration of diesel passenger vehicles of engine capacity of 2000cc or above in Delhi till 31 March 2016.
• Everest Kanto Cylinder jumped 14% at Rs 15.01 after the Supreme Court today, 16 December 2015 ordered Delhi taxis to replace diesel with CNG.
• M&M fell 5.44% to Rs 1,218.90 after reports the Supreme Court banned the registration of new diesel luxury cars and sport utility vehicles with an engine capacity of over 2000 cc until 31 March 2016.

Bindass Bol : Fed decision as per expected line of 0.25% hike. But still we can see that SGX Nifty is not showing much gain in comparison to world market. Although expecting market to cross 7800 major resistance level and show some rally but one should be fast enough to book profits and keep raising stop losses to long positions. But fresh shorts are not advised. One needs to be alert for event due on Saturday i.e. Court appearance of Mother & Son duo. The political drama is assumed to be on peak. As the party deemed to have decided to de-rail the economy from Growth trajectory. For the party everything is the Duo whatever they do / say is Laxman Rekha and U can’t raise questions on their deeds. We are freed from British Raj but got slavery to Gandhi Family Raj. It is assumed that some political drama like rally from AICC head office or Sonia Gandhi residence may be marched towards Patiala Court in which Congress CM, State in charge and others may join to show their solidarity (basically slavery) to the party leadership. It is possible that Rahul will not opt for Bail and Sonia with Vora may opt for Bail due to health issues. All this cheap politics to gain political mileage and make fool of democracy. Congress want to show that they are political victims and emergency type of situation is arising in India. And if so happens then monday market will create panic. Advisable to stay light and sit tight with funds. If such drama doesn’t take place then from monday we can expect sharp rise in market.

Nifty futures will face resistance at 7800 if breaks and sustain also will face resistance at 7850 downside 7680 –7650 will act as support.

Banknifty futures will facce resistance at 17676 –17710 if breaks then 17868-17900 support at 17410-17324-17210.

 

Equity at Breakfast : Market moving in oversold zone… buy in dips with strict stop loss of 7580..

Yaadein : Nifty lost close a percent on Tuesday in absence of any positive cues and lingering uncertainty over pending GST bill in the parliament. Selling pressure was visible across the board where metal and realty pack were the major losers. Though the bias was negative from the beginning but the decline gained pace in last half an hour for the trade and pushed Nifty below 7700 mark.

Market Outlook for the day – All indications are pointing towards decline to continue and expect Nifty to form a new 52 weeks low in near future. We uphold our view to maintain bearish option spreads in Nifty.

Corporate News –

• NHPC announced that its 120 megawatts (MW) Sewa-II power generation unit in Jammu & Kashmir (J&K) has been completely shut down for attending annual maintenance of machines for about 20 days with effect from 7 December 2015.
• Unichem Laboratories has received final Abbreviated New Drug Application (ANDA) approval from the United States Food and Drug Administration (USFDA) for Irbesartan tablets USP.
• L&T’s water and effluent treatment vertical has secured orders worth Rs. 1,053 crore from the Water Resources Department, Odisha Government, for the engineering, procurement and construction of 34 lift irrigation schemes across the State.

Bindass Bol : Congress logjam is well understood, they don’t want parliament to function. While watching Parliament TV it was very eminent from Congress members attitude. Chair was asking for their grievance as why they are protesting, but congress members were not saying anything other than slogan and to my surprise someone was also making noise of “Ooooo”. What nonsense was it ? Is it not an insult of democracy by an elected member. I personally feel that it should be investigated and the member’s involved should be suspended for rest of the term.

Anyways back to market GST is difficult to pass and any positive move will be a big positive in the market. Market will take U turn with positive news.

Nifty future support at 7682-7651-7600 and around 7651 its advised to buy with strict stop loss of 7580. Resistance will be at 7785-7839.

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p align=”justify”>Banknifty Futures decisive break below 16804 and sustain for 20 mins will drag it down to 16625-16566.