Boosted by the rollout of the Goods and Services Tax (GST), the benchmark Sensex jumped 300 points to post the best one-day gain in over a month as consumer goods companies along with metals led the gains on the indices. The 30-share Sensex resumed with a gap-up at 31,156.04 and touched a high of 31,258.33 and a low of 31,017.11 before concluding at 31,221.62, showing a smart rise of 300.01 points or 0.97 per cent. Similarly, the NSE 50-share Nifty also finished with a solid gain of 94.10 points at 9,615 after briefly reclaiming a high of 9,624.00.
However, the rupee plummeted by a whopping 30 paise to close at an over one-month low of 64.88 against the US dollar due to fresh demand for the American currency from importers. Vinod Nair, Head of Research, Geojit Financial Services, said, “the market welcomed the new tax regime with a positive note while shrugging off the initial hiccups of investors during the last couple of weeks where market witnessed consolidation. Spending is likely to increase due to the impact of lower tax and increased sales volume will continue to benefit the earnings potential in the future.” The sentiment was buoyed by expectations that the implementation of the GST will provide the much needed stimulant to the country’s economic growth.
“FMCG stocks drove the indices higher on expectations of better sales under reduced retail prices, following the GST rollout. Early hesitation now look to be wearing off as traders embrace the new GST regime, and as companies pass on the benefits to the economy. Fertilizers sector surged as the government decided to cut tax rates on fertilizers, which was further augmented by IMD’s report on active monsoons,” said an analyst. Wobbly rupee has instilled buoyancy in the IT sector but a prolonged rupee weakness may impose pressure on the market in the near term, he said.
Karthikraj Lakshmanan, Senior Fund Manager, BNP Paribas Mutual Fund, said, “the markets started the month of July on a buoyant note with indices witnessing a gap up opening as the landmark GST came into force from July 1, 2017. Investor sentiment was firmly launched in the positive zone for the day even as lacklustre macro-economic data failed to dampen the mood.” Shares of the fast moving consumer goods (FMCG) firms led the rally, followed by telecom, metal, realty and auto counters.
ITC shares rose six per cent on the bourses in the wake of GST rollout, helping the cigarette-maker to become the fourth firm to cross Rs 4 lakh crore in market capitalisation. The Finance Ministry has removed additional excise duty on tobacco, pan masala and cigarettes with effect from July 1, following the implementation of the GST. ITC surged 5.70 per cent on BSE to settle for the day at Rs 342.30. The market capitalisation of ITC rose to Rs 4,15,805 crore, leading to the firm joining the likes of TCS, RIL and HDFC Bank in the over Rs 4 lakh crore m-cap club.
The S&P BSE Mid-Cap index rose 1.13 per cent and Small- Cap index gained 1.05 per cent. Both these indices outperformed the Sensex. In the foreign exchange market, the rupee registered the lowest close for the home currency since May 23, when it had ended at 64.89 against the US dollar. The implementation of the GST spelt worries that the new indirect tax regime could bring some renewed upturn in inflation and may impact the economic growth.