HOW WILL GST IMPACT THE INDIAN STOCK MARKET

Equity markets mirror the Economic fundamentals and if GST is likely to add to that strength, investors have nothing to worry about.

Here are few important factors which an investor should know about how GST will impact the Indian markets:

Push GDP by 1.5 to 2.%:

GDP growth is seen as a strength of an economy. With GST coming into play, the GDP should foresee a boost. The current loss of income for the Govt. should slowly get eliminated and the tax revenue shall increase with GST's smooth implementation. Thus, the benefits which currently are not drawn due to multiple taxes will be extracted post-GST. This will not only benefit our nation's GDP but also have a positive outcome for our consumers. Around 80 percent of the goods will attract 18% or less GST, against 35% of currently taxed at 27% or higher. Effectively, the ushering in of GST will help reduce the prices for the end user. The Business problems of multiple taxations, etc. shall smoothen out and thus an increase in consumption will be seen. This will also create a positive outcome on GDP. India is growing at a pace of 7% and with the implementation of GST, I feel that GDP will increase by 1.5 to 2.0% over a period of time.

An increase in Earnings for Companies:

The Earnings of companies will observe a major boost as the consumption will see an increase and thus the revenues of the companies will observe a boost. In economics logic, as tax rates on mass consumption items come down triggering inflation downtrend, economic growth will be bolstered and support the bottom lines of most firms.

Sectoral Impact:

As far as sectors are concerned, the majority of the sectors will see a positive outcome. Sectors which could see immediate positive benefit are FMCG, utilities and other metal companies that use coal as an input, dairy etc. Secondly, most of the manufacturing sectors will save 1% at least on logistics cost of the total cost.

Sectors like Automobile which includes the passenger vehicles can see an immediate negative impact due to the cess announced for petrol & diesel vehicles. However, these sectors will eventually seek the benefits which it couldn't previously get and an offset against the increased rates will come into existence, thus balancing out the increased rates.

Possible hiccups expected in GST implementation:

Clarity on GST is still lacking. Both, the large-scale as well as small-scale businesses are not clear regarding the procedure of the GST. The obscurity is not just limited to the procedural aspects but also spreads to the complicated compliances it will bring in the picture. As businesses are shifting from VAT-paid system to GST system, there are divergent trends in short term. Few companies are treating distributors as partners and are eyeing to indemnify them for one-time loss which distributors may incur while this change happens. The common people are yet to ascertain the GST's implementation strategy, its registration structure and the transformation from the existing stock to the new stock.

All in all, if GST is implemented smoothly along with the necessary capacity and infrastructure to understand, plan and execute the regime, then the Capital Markets will see a major and steady boost to it. This boost will also be backed by a growing and clean economy.

Otherwise, we may see inadaptability of GST by the masses and Stock Markets shall be affected due to the same.