2nd August , 2016 Posted Under - Blog
There is a popular trick for trading, and it goes like this: “Buy on rumors and sell on news”
The BJP Government has come to power and they are lobbying to get the GST Bill passed. This has had a major impact on the market and there’s a big hustle on the Dalal street ever since. There have been news about the negotiations and diplomacy the government is conducting with the opposition and the result of this is that it’s highly likely for the bill to pass in the parliament in the monsoon session.
Confusion, however, will continue on the date of implementation. Assuming the implementation is not delayed, it most certainly will have a positive impact in both, long and short term. If the implementation is delayed it will have a negative impact in the short term. In any case, it’s a win in the long run.
The market sentiments have accepted the developments around GST in a positive manner up til now. The rumors of GST passing is well discounted and Indian markets are outperforming foreign markets and are holding up to current levels. What this means is that the market currently seems overvalued. Market has retrenched around 80% of correction started from March 2015 till early March 2016.
Old highs would be tested with the passing of the GST Bill and it would be tested in a short run as there will be profit booking, giving the old highs a tough time. However, if GST is not passed there will be an immediate adjustment in the market.
The verdict remains that GST is positive on the market unless it’s not passed and implemented, and until the time it’s not implemented, confusion remains on the ground. One can use this opportunity to exit the market.