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Winter Session - A roller-coaster ride for the government

Nov 25, 2015(17:44)
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The key Benchmark Indices has plunged since the beginning of the ongoing calendar year due to weak corporate earnings, Bihar assembly election 2015 results and other global events. The tumbling stock market is now eyeing the winter session of Parliament, scheduled to begin from 26th November, 2015 and will witness discussions on important bills like Goods and Services Tax (GST) and Land Acquisition. Narendra Modi led Bharatiya Janata Party (BJP) route to winter session will be a roller coaster ride after the recent debacle in Bihar assembly elections. The National Democratic Alliance (NDA) will be more vulnerable to opposition attacks and stalling tactics in the Rajya Sabha, where it is in a hopeless minority and has to depend on other political parties to get its legislative business approved. The biggest fear in the winter session will be a washout like the monsoon session. The so called "Mahagathbandhan" comprising of  Congress, Rashtriya Janata Dal (RJD) and Janata Dal (United) JDU, together have 50 (44, four and two, respectively) of the 543 Lok Sabha seats and 80 (67, one and 12, respectively) of the 242 Rajya Sabha seats—enough to get the road blocked. The opposition wants a debate and action on the growing intolerance across the country and unless the government deploys its best managers both in the house and outside, the coming session is likely to go the Monsoon Session way.

Historically, Parliament sessions under the NDA government's regime in the last 18 months have not been good for the markets. The Budget session 2015 had not given any boost to the equity markets as well. On the other hand, the Parliament logjam during the Monsoon session generated major cuts to the indices. This time the scenario is likely to be different, especially at a time when the US Federal Reserve could raise rates at its meeting on December 15 - 16 that falls during the Parliament's winter session?

In the recent past, the government launched a new State Electricity Board reform scheme (UDAY), steps to fast track grounded projects, a possible resolution to long-pending tax disputes and corporate tax reforms. Also, the government has approached the opposition for GST in a bid to get the critical reforms passed this Winter Session. The NDA allies will meet on 25th November, 2015 to discuss its own strategy followed by an all-party meeting the same day. Apparently, cabinet ministers and all MPs of the NDA government have been told to do their home work thoroughly so that they are geared up for debates and discussions and don't falter at crucial moments. The issue of sharp increase in the retail prices of food items will figure prominently in both the houses. On the other hand, any signs of passage of GST & Land ordinance bills may boost the market sentiments for short to medium term.

The GST Bill, or the Constitution (122nd Amendment) Bill, 2014 was passed in the Lok Sabha on 5th May, 2015 and sent to the Rajya Sabha. A Select Committee was constituted to look into the Bill. The committee submitted its report to the Rajya Sabha on 22nd July, 2015.  The Congress's demand is for a cap on the amount of taxation; it is opposed to the imposition of an additional 1% tax; its demand is for a mechanism like a neutral authority to resolve disputes between states and the inclusion of alcohol, tobacco and petroleum products in the new tax regime.

Keen to push the Constitution Amendment Bill for the goods and services tax (GST) in Parliament’s winter session, the government reached out to the opposition on 18th November, 2015, indicating its desire to avoid disruption in the house. A simplified taxation in India , designed to subsume more than a dozen levies and create a single market can be a booster dose for the economy. More critically, it will show the world that India is serious on solid economic reforms. On the other hand, missing the April 2016 deadline can send a wrong signal.

While coming to the markets perspective, there are no expectations as regards to the passage of this bill. In the upcoming session of Parliament, the markets will be positively surprised if it gets through. The markets are currently pricing in the fact that the bill will not go through in the current session. The worst we can see on the Nifty over the next one month is 7,500 and the upside is capped around 8,250 levels.

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