4 May 2017

GST will make markets volatile

Indian equities have appreciated to 2.7% of global market capitalization, compared to a trailing six-year average of 2.1%; rapid growth in aggregate capitalization suggests the market will continue to be supported by inflows from ETFs and index funds. A study by the US Federal Reserve estimates that the introduction of nationwide GST will boost GDP by up to 4.2% over time as lower taxes on manufactures boost output and reduce the cost of products. The introduction of GST on July 1st will probably lead to some destocking in June, an increase in working capital, a boost to market share for larger companies and an increase in compliance costs.

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