Indian Stocks Swing as Investors ‘Sell the News’ on GST Passage

Updated on
  • Automakers among top performers; logistics companies tumble
  • Rupee strengthens seventh time in eight days; bonds advance

Indian stocks closed little changed in volatile trading as investors bet the benefits from the nation’s biggest tax reform in decades approved last night won’t immediately flow through to corporate earnings.

The S&P BSE Sensex swung from an advance of 0.8 percent to a decline of as much as 0.3 percent, only to end 0.1 percent higher for the day. Automakers gained, while lenders and logistics companies slid as some investors cashed out some companies that benefit from the passage of the goods-and-services tax. The rupee climbed 0.1 percent to 66.9187 per dollar, gaining for a seventh time in eight days.

About five stocks rose for every three that fell on the S&P BSE 100 Index, which gained 0.2 percent. Further upside may be limited because the benefit from the GST will reflect in company profitability in the year ending March 2018, according to Bajaj Allianz Life Insurance Co. The government Thursday set a target date of April 1 next year for the tax to take effect.

“Most stocks that stand to gain from the GST bill have already rallied anticipating its passage,” Andrew Holland, chief executive officer of Mumbai-based Ambit Investment Advisors Pvt., said by e-mail. “The bill’s implementation and details such as the tax rate will take time. It’s a good step for the long term.”

Lawmakers on Wednesday unanimously approved the creation of a national sales tax a decade after the move was first proposed, handing Prime Minister Narendra Modi the biggest legislative victory for since he took office in 2014. The tax can add as much as 2 percentage points to economic growth, Finance Minister Arun Jaitley has said.

The bill now has to be endorsed by the Modi-controlled lower house and then ratified by at least half of all states, a process projected to be concluded before the year ends.

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“It will be some time before we know the rates for various industries and companies, so it’s early to take a sector call,” Sampath Reddy, chief investment officer at Bajaj Allianz, which has $6.5 billion in assets, said in an interview from Pune. “The market seems to have moved up more than expected. We could see a small correction in the near term.”

The Sensex has rebounded 21 percent from a low reached in February and trades at 16.1 times 12-months earnings, near the highest in 15 months. Valuations for a measure of medium-sized companies are at a level last seen in early 2008.

Sovereign bonds halted two days of losses. The yield on notes due January 2026 fell three basis points to 7.17 percent, according to the central bank’s trading system.

Tata Steel Ltd., the biggest producer of the alloy, and Tata Motors Ltd., owner of Jaguar Land Rover, were the best performers on the Sensex. Two-wheeler makers Hero MotoCorp Ltd. and Bajaj Auto Ltd. climbed more than 1 percent each.

Asian Paints Ltd. fell for the first time in four days. Lupin Ltd. slid to a three-week low.

Gati Ltd., in which Japan’s Kintetsu World Express Inc. has a stake, plunged 4.6 percent, the most since July 13. The stock has increased 55 percent since the start of the financial year on April 1. Snowman Logistics Ltd. tumbled 8.6 percent, extending Wednesday’s 5.6 percent slide. The company’s shares have risen for five consecutive months through July.

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