How markets may react to Trump-Putin talks and Modi's GST tax reform on Monday?
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The understanding reached between the US President Donald Trump and his Russian counterpart Vladimir Putin on Ukraine is expected to buoy markets when trading resumes on Monday. Adding to the optimism, Prime Minister Narendra Modi's Independence Day announcement of major Goods and Services Tax (GST) reforms this Diwali could further boost investor sentiment, opine experts.While Trump and Putin did not reach a deal to end Russia's war in Ukraine, Putin claimed he and Trump had reached an 'understanding'.The close to three-hour meeting between the two heads in Alaska has not resulted in a ceasefire between the warring nations (Russia-Ukraine) but Trump called it a "very good meeting" though he said that there's no deal until there is a deal."We had a very good meeting today, and I think a lot of points were negotiated on behalf of Ukraine', he said. 'There's no deal until there's a deal,' and stated that he plans to speak with Ukrainian President Volodymyr Zelenskyy and European leaders soon.Putin on the other hand warned Europe not to 'torpedo the nascent progress.'.On the domestic front, PM Modi's announced rate cuts to be rolled out by Diwali in the GST 2.0. Speaking from the Red Fort on Independence Day, Modi said GST rates will be lowered on everyday-use goods as part of reforms to the eight-year-old tax regime.Quoting Finance Minister Nirmala Sitharaman, PTI later reported that the government envisages two slabs — standard and merit — plus special rates for select items, replacing the current four brackets of 5%, 12%, 18% and 28%, with luxury and sin goods attracting an additional levy.Kranthi Bathini, Director-Equity Strategy at WealthMills Securities said that the meeting between Trump and Putin is a positive development and a progress from the earlier logjam and global stock markets will take it well even without specific outcomes. These are complex problems and cannot be resolved in one meeting. The agreement to meet again with calm markets," Bathini said.Anuj Gupta, Director at Ya Wealth Global Research, echoes a similar sentiment further highlighting Trump's statement that he would hold off imposing tariffs on China for buying Russian oil. This is a progress, Gupta said, adding that he did not mention India, which is another major buyer of Russian crude and has been slapped with a total 50% tariff along with penalty for the imports from Russia.Sunny Agrawal, Head - Retail Fundamental Desk at SBI Securities called no negative development as a positive trigger for the market. "Trump's statement that "he will not have to think of retaliatory tariffs on countries buying Russian oil right now but may have to 'in two or three weeks" now offers at least a temporary relief to countries like India". It seems that an additional tariff of 25% on India beginning August 27 for importing crude oil from Russia, will be on a backburner, he opined.Meanwhile, Jefferies' global head of equity strategy, Christopher Wood, said the Trump administration's imposing a 50% tariff on Indian imports is not a reason to sell Indian equities. Instead, it's a reason to buy them since "it is only a matter of time before Trump backs off the stance, which is not in America's interest.""It is worth noting that the track record makes it clear that it pays to stand up to Donald," said Wood in his latest 'Greed & Fear' report.Agrawal of SBI Securities said that India's plan to move to 2 slab GST structure (5% and 18%) coupled with 1 more slab of 40% for sin products augurs well for consumption. "Few categories like large TV, AC, cement, automobiles, etc are likely to get cheaper, as they are shifted from 28% category to 18%. Moreover, reduction in GST rates on insurance products also will ease burden on consumers. Cheaper cement prices can have a multiplier effect on various sectors like real estate, roads/highways/infra as cost of production is likely to reduce and the same can be passed on to the consumer," he said.While the markets will take the news positively, its implementation should be swift, otherwise the festive season sale could get postponed in anticipation of the reduced prices, thereby impacting the demand in the short term.Gupta and Bathini also lauded the announcement saying that any relaxation from GST in this festival season will boost consumption and help in the overall growth of the economy. They said that the consumption theme like FMCG, autos could now be in focus.Indian equities snapped a six week losing streak ending with weekly gains of over 1%.Market expert Santosh Meena said that Indian markets could react over GST and the "productive" Trump-Putin meeting when they resume trading on Monday.The Head of Research at Swastika Investmart decodes the Nifty chart highlighting formation of a strong base at the 24,350 level, which he said is a bullish engulfing candlestick pattern on the weekly chart. "The immediate resistance lies at the 20 and 50-day moving averages (DMAs) clustered around 24,700-24,800. A decisive break above this level could trigger a short-covering rally towards 24,950, 25,080, and 25,225. Immediate support is at the 100-DMA of 24,575, with the crucial support level remaining at 24,350," Meena said.However, Anand James, Chief Market Strategist at Geojit Investments expects more downside from here. "Directional moving indicators are still in favour of more downsides with 24,000 and 23,560 as potential downside supports attracting prices lower," he said."That said, the last week saw several attempts to push higher, giving us reversal hopes. Apparently none of those moves managed to successfully close above the 24670-720 band, the near term congestion resistance, they did manage to bring parabolic sar under the price, lending a positive bias. More importantly, the broader market has shown even better signs of resilience having had the highest number of Nifty 500 constituents closing above 10 day SMA, since 24th July. Incidentally, the Nifty had tumbled from the 25,200 region on that day. This would be the objective we would be aiming, should we clear above 24,720 on Monday," James said.
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