Markets rebound on GST comment, Chinese rate cut

Government’s hint at reconvening Parliament in a bid to pass the GST Bill boosted market sentiments.

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Domestic markets on Tuesday bounced back from their lowest levels in a year after the government said it would make another attempt to pass the goods and services tax (GST) and China cut interest rates to salvage its economy and markets.

After Monday’s 1,625-point bloodbath in the Sensex, the benchmark started the session higher, hitting a high of 26,124.83, but fell due to the selling pressure as China equities lost over 7 per cent. Finally, the Sensex ended the day higher by 290.82 points, or 1.13 per cent, at 26,032.38. The index lost 2,190.08 in the previous three sessions.

The rupee also appreciated by 55 paise, its biggest single-day gain in over seven months, to close at 66.10 against the American dollar on heavy selling of the greenback by exporters and banks. The heavy short-covering also aided the recovery as the market was in an oversold position. The broad-based NSE Nifty too covered up some lost ground, up 71.70 points, or 0.92 per cent, to end the day at 7,880.70.

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The market sentiment got a boost after parliamentary affairs minister Venkaiah Naidu said the government might reconvene Parliament to try to pass the GST Bill after it failed to clear the upper house earlier this month. Markets expect the government to push through the much-awaited Bill in the special session.

Allaying fears over the impact of the China crisis, Reserve Bank Deputy Governor SS Mundra said India is at a stage where “we cannot be disconnected from the global events” and the “solution is the right mix of the medium and long term policies.” Mundra, said, “We are an interconnected market and there would be occasions when these kinds of things will happen, but I think the solution is the right mix of the medium and long term policies.”

Analysts and fund managers said positive comments from the government and the Reserve Bank helped the market to get back on the feet. “The recovery was in response to the statement made by the finance minister that the economy is in a revival phase and will clock a growth rate in excess of 8 per cent in 2015-16, after the total indirect tax collections during the first four months of the fiscal rose by 37 per cent. Besides, firm opening in European counters and recovery in currency also supported the recovery,” said Jayant Manglik, president, retail distribution, Religare Securities.

Meanwhile, RBI Governor Raghuram Rajan, said in London that China is a big country and every adverse development has impacts. “There is a lot of uncertainty about what the real numbers are…the numbers have to come out but China is a big country, has become very important to the global economy. Every adverse development across the world affects the rest of the world in some ways,” Rajan said about the China-led slowdown. “It works through financial markets first, then trade later. So it’s something that everyone is concerned about. But you have to be careful about attributing everything to China,” he told BBC. With PTI