Gst Council To Meet Today, First Time After July 1 Roll Out

A fortnight into the GST, small and medium dealers, and manufacturers are grappling with issues of the new indirect taxation regime.

Finance Minister Arun Jaitley will chair the 19th meeting of the GST Council on Monday, via video conference.

This would be the first meeting after the implementation.

The meeting would reportedly discuss tweaking of rates on some products, besides taking stock of the rollout of the new indirect tax system.

The spread was 1.9 percentage point at the end of FY16 and 4.8 percentage points at beginning of the current rally in March 2013.

The spread was 1.5 percentage point at the end of March 2008.

The earnings yield is the potential yield for an equity investor if the company pays 100 per cent of its current (annual) net profit as equity dividend.

Simply put, it is net profit divided by the market capitalisation of a company.

Typically, the earnings yield on equities should be sufficiently higher than the yield on riskfree assets (such as government bonds) to compensate for the greater risk of owning equities.

Analysts say that this raises the prospect of an outflow of capital from the equity market if the bond yields in the US harden any further.

“The market has been expensive for too long now, aided by lower interest rates in major developed markets like the US. Any further tightening of interest rates in the US or further fall in the earnings yield in India may lead toamarket correction,” says Dhananjay Sinha, head research, economist and equity strategist, Emkay Global Financial Services.

The benchmark interest rates in the US are up nearly 20 bps since the beginning of the current calendar year.

One basis point is onehundredth of one per cent.

This has been partly compensated by around a decline of 10 bps in benchmark interest rates in India.

While many are expecting interest rate cuts by the Reserve Bank of India, there are others who think otherwise.

They argue that interest rates in India could rise, as various state governments hit the bond market to raise funds to finance the farm loan waivers and bigger fiscal deficits.

For domestic investors, the yield spread on equities (difference between 10 year GSec yield and equities yield) is nowanegative 3.2 percentage point, which is worse than a negative spread of 2.8 percentage point at the end of March 2014 but better than negative 4 percentage point at the end of FY 15.

Simply,abroad portfolio of stocks now yieldsapotential dividend of Rs 3,300 for every Rs 1 lakh worth of investment, down from Rs 4,000 at the end of March 2016 and Rs 6,600 at the end of March 2013.

The market is set to get even more expensive as brokerages expect companies to report declines in net profits onayearonyear (YoY) basis during the June 2017 quarter.

The combined net profit of all Nifty 50 companies is expected to decline by 2.6 per cent YoY during the quarter, while excluding metals & oil companies, the net profit is likely to decline by 7.6 per cent YoY for the June quarter.

Three index companies —TCS, IndusInd Bank, and Infosys —have reported their firstquarter results so far and the net profit trend is far from being exciting.

The Business Standard, New Delhi, 17th July 2017

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