Indian Indices Trade Flat; Crude Oil Witnesses Selling Pressure

Tue, 23 May 01:30 pm

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Indian share markets are presently trading marginally lower. Sectoral indices are trading on a mixed note with stocks in the healthcare sector and power sector witnessing most of the selling pressure.

The BSE Sensex is trading down 57 points (down 0.2%), while the NSE Nifty is trading down 15 points (down 0.2%). The BSE Mid Cap index is trading down by 0.8%, while the BSE Small Cap index is trading down by 1.2%.

Indian indices have continued to trade on a volatile note in the afternoon session. Most of the selling pressure is seen on the back of mixed global cues, F&O expiry, and quarterly result announcements.

In the news regarding goods and services tax (GST), the Finance Ministry today said the new tax regime will lead to lower tax burden in several commodities, including packaged cement, medicaments, smartphones and medical devices.

Packaged cement attracts central excise duty of 12.5% plus Rs. 125 PMT (per metric tonne) and standard VAT (value-added tax) rate of 14.5%. At these rates, the present total tax incidence works out to more than 29%. At the final level, the present total tax incidence would work out to more than 31%. As against this, the proposed GST rate for cement is 28%, the ministry said in a statement.

For medicaments, the present total tax incident works out to more than 13%. As against this, the proposed GST rate on medicines, including ayurvedic medicines, is 12%. Owing to this, there will be lesser tax burden in case of medicaments, including Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems.

One shall note that Finance Minister Arun Jaitley headed Goods and Services Tax (GST) Council has decided to place services under four slabs - 5%, 12%, 18% and 28% compared to the current uniform 15% levy on all eligible services.

In our view, implementation of the GST promises to transform India into a single common market and there are many sectors which will gain immensely from this transition.

The tax regime is expected to bring about a structural change in the Indian economy. The implementation of the same is bound to bring more companies under the new tax regime. This will provide a level playing field to organized players that face significant competition from the unorganized segment.

Shrinking share of India's informal economy

The above shift could be a positive for stock market participants too, as it will lead to a value migration from unorganised players to organized players. And companies with solid fundamentals and a competitive moat will capture most of this value.

Our Hidden Treasure team is already on the lookout for opportunities in such companies.

If you would like to dig deeper into the practical implications of GST, I strongly recommend you download Vivek Kaul's free report, What the Mainstream Media DID NOT TELL YOU about GST.

In the news from commodity markets, crude oil is witnessing most of the selling pressure today.

This comes as the US President Donald Trump proposed the sale of half the country's strategic oil reserves.

Volatility is also seen ahead of the OPEC meet this week where oil producers are going to decide to cut output to tighten the market.

The upcoming meet between the OPEC and participating non-OPEC countries is scheduled for May 25th to discuss whether to extend the curbs in oil production in the second half of this year.

More production cuts will mean curb in crude oil supplies and support Brent crude oil prices.

One shall note that crude oil prices have been remarkably silent over the last two years. Prices have remained within a tight range, rarely dropping below US$40 or rising above US$60. Volatility has crashed. And if you are trading crude oil, it's critical to understand why this has occurred.

One of the issues of Vivek Kaul's Inner Circle (requires subscription) explains what has triggered the above taming in crude oil prices.

To keep a tab on the movements in crude oil and other commodities, you can read the stock market commentary from the Daily Profit Hunter team. Their commentary tracks the developments in the global economy as well as stock, currency and commodity markets.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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