Will GST revamp drive lasting gains or just short-term spurts in markets?

Mumbai: India's stock indices ended marginally higher on Thursday, giving up most of the early gains that were fuelled by the overhaul of the country's goods and services tax (GST) late Wednesday. The indirect tax revamp is aimed at boosting consumption and simplifying compliance to boost growth and cushion the economy from the impact of US tariffs and global uncertainty. Shares of consumer goods companies and automakers, key beneficiaries of the GST cuts, rose and then fell as investors booked profit.

On Friday, equities gave up early gains as profit booking in consumer stocks and weakness in the IT sector offset a rally in autos following government tax cuts. The NSE Nifty 50 slipped 0.03% to 24,724, while the BSE Sensex fell 0.13% to 80,609 by 10:32 a.m. IST, despite both benchmarks gaining around 0.3% intraday.

"There was some build-up in some of the segments where the positive impact of the GST rationalisation was anticipated," said Pankaj Pandey, head of retail research, ICICI Direct. "The market gave up some of the gains as it awaits more visible signs for the demand environment to improve."

The NSE Nifty finished at 24,734.30, up 0.1% or 19.25 points. The BSE Sensex ended at 80,718.01, 0.2% or 150.30 points higher. Among sector indices, the Nifty Auto index ended 0.9% after gaining as much as 3.7% earlier on Thursday. The Nifty FMCG gained 0.2%, while the consumer durables index ended almost flat.

'Earnings Visibility Lower'
Mahindra & Mahindra emerged as the top gainer and jumped 6% on Thursday. Bajaj Finance rose 4.1% and Apollo Hospital was up 2%. In the past week, the Nifty auto and consumer durables indices jumped 3.2% each. The Nifty FMCG gained 2.7% while the Nifty India Consumption Index advanced 2.4%.

"Investors booked profits today because the markets remained in a 'sell on rise' mode," said Siddarth Bhamre, head of research, Asit C Mehta Intermediates. "Since the valuations are expensive and the earnings visibility is lower, investors were not too gung-ho."

The rally in consumer-oriented stocks had been triggered by Prime Minister Narendra Modi's announcement in his Independence Day speech on August 15 about the rationalisation of GST slabs. With the GST trade in the stock market playing out, investors will now look for evidence of the impact of the tax cuts on actual demand.

"While the rationalisation of GST rates is good for consumption, the demand will move up once there is an uptick in purchasing power, which will take a couple of more quarters," said Bhamre.

The Nifty Mid-cap 150 and the Small-cap 250 indices declined around 0.5% each on Thursday. Out of the 4,280 shares traded on the BSE, 1,715 advanced, while 2,421 declined.

In the past week, the mid-cap and small-cap indices rose 1.4% and 1.8%, respectively.

The benchmark Nifty is facing resistance at the 25,000 levels with heavy options positions capping upsides, said Vipin Kumar, AVP equity research, Globe Capital Market.

"The index is expected to move in the range of 24,450 to 25,100 levels as a decisive break on either side is imperative for a strong directional move," he said.

Foreign portfolio investors (FPIs) sold shares worth a net Rs 106.3 crore on Thursday. Their domestic counterparts bought shares worth Rs 2,233.1 crore. In September, global investors dumped shares worth Rs 3,610 crore.