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Non- passage of GST Bill unlikely to rock markets

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The markets are keenly eyeing the prospects of the goods and services tax ( GST) Bill in the monsoon session of Parliament. While passage will be sentimentally positive for the Street, any negative development could trigger a knee- jerk reaction from the markets with a limited downside from the current levels, analysts say.
According to reports, apart from GST, there are 25 Bills that form a part of the legislative agenda of the National Democratic Alliance ( NDA) government. Experts say the All India Anna Dravida Munnetra Kazhagam (AIADMK) will play a pivotal role in passage of GST. Even if the Congress votes against it, support from the AIADMK, either through abstaining or voting in favour of the Bill would help clear the GST Bill in the Rajya Sabha.
“If GST is passed in the Rajya Sabha, it will easily be cleared by the mandated 50 per cent of states, as 20 out of 29 states and two Union territories are ruled by either the NDA or with states in favour of the Bill. In such a scenario, GST rollout will not be an issue once the Rajya Sabha clears the Bill,” say Amit Gupta, Raj Deepak Singh and Sanjay Manyal of ICICI Securities in a recent report.
Since presentation of the Budget in February when sentiment turned positive for the overall market, the S& P BSE Sensex and the Nifty 50 indices have gained around 20 per cent and 21 per cent, respectively, while the S& P BSE Mid- cap index has surged 26 per cent during this period.
Analysts say the upbeat sentiment is unlikely to change in a hurry given the favourable domestic cues even if the GST Bill is not cleared in the upcoming Parliament session, unless there are negative global headwinds.
GChokkalingam, founder and managing director of Equinomics Research & Advisory, says: “ Though the markets expect the GST Bill to be passed in the coming monsoon session of Parliament, I expect the Bill will be cleared next year, only after the state elections are over and if the NDA can improve its overall tally in the Rajya Sabha. In case the Bill doesn’t go through in this session, there might be a knee- jerk reaction from the markets, which can correct two- three per cent as a result. While there may be some disappointment, a big crash is ruled out.” An overall improvement in tax collections, a good monsoon, healthy foreign flows and a hope of improvement in corporate earnings are some of the factors that analysts list that are currently fuelling the market rally, in the absence of negative global cues.
“GST is one of the positive factors but not necessarily the only factor that is driving the markets. Though the markets expect the Bill to be passed in the monsoon session, even if it doesn’t sail through, the markets will take it in its stride.
The downside will be limited in case Parliament doesn’t approve the Bill in this session,” said Jagannadham Thunuguntla, head of fundamental research at Karvy.
Business Standard New Delhi,14th July 2016

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