In the aftermath of the bill getting passed, the strength in the markets to continue with Nifty trading at higher levels in the coming days.
The Nifty 50 Index is at a 52 week high, marching its way upwards and is expected to break lifetime highs of 9000 levels. The August expiry has started on a positive note with large concentration of open interest around 9,000 calls seen prior to the passage of the GST bill. In the aftermath of the bill getting passed, the strength in the markets to continue with Nifty trading at higher levels in the coming days.
GST Bill Impact: With the passing of the Constitutional Amendment Bill by the Rajya Sabha, GST is a reality now with the Government planning to work towards implementing it from April 1, 2017. This is the biggest tax reform in India post independence and is seen as a step to increase the reputation of our country globally by aiding reduction in inflation & tax evasion. It is expected that the implementation will add 100-150 basis points to the country’s growth rate along with boosting FII & FPI confidence in the Indian economy.
Normalization of Monetary policy by FED: The US labor market is witnessing substantial recovery and is expected to reach full employment by the end of 2016. With the improvement in the Housing market, the FED which until now has kept mum on the increase in Interest rates, may find this as an opportunity to start the normalization process for the monetary policy. The rate hike is expected to be slow & accommodative considering it’s after effects & the global situation. Although the markets have discounted an expected rate hike later this year, what remains to be seen is the pace at which such rate hike will be carried out.
Recovery of the Chinese Economy: The Chinese Economy witnessed decent growth in the first half of 2016 after a difficult 2015, mainly due to the ease in monetary policies. Inline with the growth targets set by the Government due to stimulus & continuous increase in the supply of credit, the key question is how well the growth story will continue when the Government backs off from providing such aid. Even though China has escaped a hard landing, it may enter into an ugly recession, if the regulators don’t look for sustainable measures to boost the economy.
Fall in crude prices: Globally most commodity prices are still in a correction phase with crude oil at multi year lows. The reduction in the price of crude is mainly attributed to a fall in demand & supply glut. The reduced crude prices acts as a tailwind to the Indian economy and the prices are expected to stay at such lower levels, the benefits of which will be felt at a greater degree to India.
With improved fundamentals, good monsoons, inflation under check & good reforms, India offers itself as a bright spot for global investors to park their money.
The author is chief operating officer, Zerodha