Thursday, August 4, 2016

Impact of GST on Nifty and stocks. How to trade post the news?


Impact of GST on Indian Equity markets – Nifty and Sensex and what should be the trading strategy post the event?

Many were eyeing on this one major event as positive trigger to carry the overall market higher and Nifty towards 9000++ levels. People want to see logical reaction by stock market after a news or event and they many had their bullish bets on passing of GST bill in Rajya Sabha. 

What is concerning me is that if the news was that significant then we should have seen a strong rally in the opening hour itself. Instead the Gap up opening was immediately filled in and now we are seeing a range bound movement.

GST in all its sense will benefit a few sectors like Auto, Cement, FMCG but might also hurt a few other sectors like IT, Pharma, Telecom which have to shell out more tax then they are paying in existing regime.  

Neverthelss, there is always more to the stock price movement rather than tax policy decision. What majorly impacts the business is the demand by consumers and the impact of input costs and what impacts stock prices is perception about the future demand and outlook. Too much euphoria had been created around an event which in all due respect is positive but markets are discounting the future and the study that helps us understand the current position of equity market is Elliott wave irrespective of the news or event.

Nifty 60 minutes chart:






















Now look at the above chart and try to think can you identify the areas of major news or events and markets reaction to it?  Yes the entire price movement is well channelized and what more – Even the impact of BREXIT was only temporary where prices found support near the channel and bounced back only find resistance near the upper end.

Look at today’s news or GST bill being passed in RajyaSabha which is considered as one of the biggest reform since 1992. But what is the impact on prices so far?

Case in point: News or events will only result into temporary movement but eventually the original trend will resume. 

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