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RBI Policy in Focus

Market view for the week

GST Bill will be presented in the Lower House and RBI policy is in focus as well. Considering the performance of Indian economy in last quarter, street must not be expecting any dramatic policy by RBI or even hardly any possibility of surprises, but the future commentary will be in focus. Till the time, companies have posted quarter results as per the street expectations. Banks are disclosing their NPAs in this quarter but buying pressure has been witnessed as well.

GST, the biggest economic reform since 1991, is likely to sail through smoothly in the Lower House. It will replace a raft of different state and local taxes with a single unified value added tax system to turn the country into world's biggest single market. Prime Minister Narendra Modi is likely to intervene during the debate on the Bill in Lok Sabha. The Bill was passed by Lok Sabha in 2015 and now it has to go back to the Lower House for incorporating the amendments approved by Rajya Sabha. Congress leader Jyotiraditya Scindia on Sunday said the party will support GST Constitutional Amendment Bill and has issued whip to all its MPs to be present in the House on Monday where it is scheduled to be taken up for passage. Aiming for early implementation of the GST, senior Union ministers have spoken to chief ministers of NDA-ruled states to ensure that the constitutional amendment is ratified by state assemblies at the earliest.

India's macro conditions are improving, more so because of positive events like the Goods and Services Tax (GST) Bill getting passed and monsoon significantly increasing kharif and rabi volumes. Cement is the only sector to have great play from state government investments, housing projects, broad-based construction activities and agricultural constructions; it is running on capacity utilisation of over 80 percent in most parts of the country. The current valuations definitely build in a lot of optimism in terms of secular growth opportunities and improving ratios, if looked at the NBFCs, which is actually very true. However, given that India is under banked and credit to gross domestic product (GDP) ratio is pretty low and we have Indian consumer who has fairly high disposable incomes at this point in time given the low inflation and the ability to leverage, so that is going to drive a lot of retail focus in NBFCs in terms of growth.

Stocks to watch: Edelweiss Financial Services is on the upside while Idea Cellular is on the downside

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