GST blues may make markets volatile, experts at sea over economic impact

The Indian stock market could continue to remain volatile with a downward bias as corporates and investors assess the impact of the landmark goods and services tax (GST) on their businesses, investments, and the economy.  Market pundits are still trying to get a grip on how the new tax regime will impact inflation, gross domestic product, and profit margins of firms after July 1 roll-out. They, however, are unanimous in their belief that the markets could remain under pressure as the transition to the GST is likely to be fraught with hiccups, which could disrupt economic activities. Ahead of the GST — which subsumes most of the pre-GST indirect taxes levied by the Centre and states — implementation, the benchmark Nifty declined in six of the previous eight trading sessions, with automobile and banking stocks, in particular, underperforming the market. Commodity Trading Tips

“The GST may disrupt the system for a few days, maybe weeks or months, as people are not yet fully ready for the execution. The Street will react to the initial disruption, as markets are trading at rich valuations with expectations of better corporate earnings,” says Motilal Oswal, chairman and managing director, Motilal Oswal Financial Services, adding that the benchmark indices could correct up to 3 per cent from pre-GST levels. The Nifty 50 index on Friday closed at 9,520, while the S&P BSE Sensex closed at 30,921.6. Despite the recent correction, both the indices are trading less than 2 per cent below their all-time highs touched last month. Also, they are trading at 19 times their estimated one-year forward earnings, compared to long-term average of 16 times. Nifty Trading Tips