The goods and services tax (GST), which has been hanging fire for several years has finally passed through the crucial hurdle of the Rajya Sabha certification. It may take months to implement and the initial impact on central government finances will, quite likely, be negative. From the European Union (EU) to Malaysia, nations which have implemented GST type tax systems have eventually benefited. But, it has taken a long period, typically one financial year or more, for revenue departments to reformat mindsets and systems.
However, the market reaction is likely to disregard all those caveats and be positive. How positive is a question mark because some of the smart money has been discounting the possibility of the Bill being passed for quite a while now.
Let's look at this from a technical perspective. The Nifty has lifted from a low of 6,850 on the Budget Day to current levels of 8,500-plus. In itself, that's an impressive run of 26 per cent in five months. That move has put the market firmly back into bullish territory.
There is one technical signal however, that this market has not yet hit. In March 2015, the Nifty hit an all-time high of 9,120, it is still short of that mark. If this is a full-on bull market, it should go past that level and register a new record high fairly soon. After all, 9,120 is only about five-six per cent up from current levels and a market, which has already delivered 26 per cent in five months, could be expected to run for at least another five per cent, if the current momentum is maintained.
The GST might provide sufficient impetus to force the Nifty up that elusive five per cent. Technically speaking, there is resistance at every 50-point interval on the Nifty beyond this point. But, there is also a large volume of cash flowing into the market - the bulk of it from FPIs (foreign portfolio investors).
Switching from the purely technical to the pragmatic analysis of news flow, there is unlikely to be any near-term event, which is markedly more positive than the GST. The market has been backing the Modi government as a reforming influence since May 2014, and it really hasn't delivered much in the way of reform till date. The GST would go a long way in helping to meet the long-term expectations. Given that the monsoon is also hitting a sweet spot, sentiment also seems fairly strong.
Now that the GST is through, if there is no new impetus to the rally, there would be cause for worry. The contrarians would be watching for a tipping point: when too many people are bullish, the market tends to fall because everybody has already finished doing all the buying they intend!
However, at least on the surface, this market has not reached the contrarian tipping point yet. The Domestic institutions continue to be net sellers and the Nielsen Global Consumer Confidence Index indicates that the Indian consumer is a little less confident than she was, in the last quarter. However, she is still highly confident. The next week or two should tell us if the GST had already been fully-discounted before it was voted through.
The author is a technical and equity analyst
However, the market reaction is likely to disregard all those caveats and be positive. How positive is a question mark because some of the smart money has been discounting the possibility of the Bill being passed for quite a while now.
Let's look at this from a technical perspective. The Nifty has lifted from a low of 6,850 on the Budget Day to current levels of 8,500-plus. In itself, that's an impressive run of 26 per cent in five months. That move has put the market firmly back into bullish territory.
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Most of the price-volume signals are now positive. The market has registered successive new 52-week highs and its trending way above the 200-Day Moving Average (currently at about 7,850). Breadth has been excellent through this period, with advances comfortably outnumbering declines. Indices that track smaller stocks such as the Nifty Next 50 and the NSE 500 have also gained, by 31 per cent and 26.5 per cent respectively, in the same period.
There is one technical signal however, that this market has not yet hit. In March 2015, the Nifty hit an all-time high of 9,120, it is still short of that mark. If this is a full-on bull market, it should go past that level and register a new record high fairly soon. After all, 9,120 is only about five-six per cent up from current levels and a market, which has already delivered 26 per cent in five months, could be expected to run for at least another five per cent, if the current momentum is maintained.
The GST might provide sufficient impetus to force the Nifty up that elusive five per cent. Technically speaking, there is resistance at every 50-point interval on the Nifty beyond this point. But, there is also a large volume of cash flowing into the market - the bulk of it from FPIs (foreign portfolio investors).
Switching from the purely technical to the pragmatic analysis of news flow, there is unlikely to be any near-term event, which is markedly more positive than the GST. The market has been backing the Modi government as a reforming influence since May 2014, and it really hasn't delivered much in the way of reform till date. The GST would go a long way in helping to meet the long-term expectations. Given that the monsoon is also hitting a sweet spot, sentiment also seems fairly strong.
Now that the GST is through, if there is no new impetus to the rally, there would be cause for worry. The contrarians would be watching for a tipping point: when too many people are bullish, the market tends to fall because everybody has already finished doing all the buying they intend!
However, at least on the surface, this market has not reached the contrarian tipping point yet. The Domestic institutions continue to be net sellers and the Nielsen Global Consumer Confidence Index indicates that the Indian consumer is a little less confident than she was, in the last quarter. However, she is still highly confident. The next week or two should tell us if the GST had already been fully-discounted before it was voted through.
The author is a technical and equity analyst