NIFTY Not Moving Despite GST Cut | Sensex, BN & Market AnalysisThe government's decision to reduce taxes is a positive factor for market sentiment, yet the market has not become fully bullish or reached new highs. This raises the question as to why market is struggling to go up.
Well, the answer lies in the weightage of the Nifty index.
Nifty's Sector Weightage
Approximately 60% of the Nifty's weight is carried by just three sectors:
* Financial Services : Makes up 36.82% of the Nifty's weight.
* Oil, Gas and Fuels (Majorly Reliance) : Accounts for 9.90% of the weight.
* IT Sector : Holds around 10.51% of the weight.
The remaining 40% of the Nifty is composed of many other sectors, including metals, pharma, and FMCG etc
Impact of GST Reforms
The recent Goods and Services Tax (GST) reforms were primarily aimed at the consumption sector to provide relief to the middle class. While the tax benefits are a positive for the consumption sector, its overall weight in the Nifty is only around 7%.
In contrast, the banking sector, which has around 37% weight, did not receive any direct benefits from the GST rate cuts except Insurance Companies. This is a key reason why the banking sector and by extension the market, has not turned fully positive.
Similarly, the IT sector is already largely exempt from GST, so the recent rate cuts had no direct impact on it, preventing it from driving the market up.
The oil and gas sector, dominated by Reliance, also presents a mixed picture. While some areas like Reliance's FMCG and solar projects are positively impacted by the new rules, the government has actually increased taxes on oil and gas, which makes up a significant portion of Reliance's revenue and profit. Furthermore, international tensions continue to affect the revenue and profits of the oil and gas sector.
The Role of International Factors
These three major sectors—banking, IT, and oil and gas—are all directly related to international factors like global situations and the political tensions between India and the US. The market is in a "wait and watch" mode as it awaits the outcome of potential future US actions, such as imposing tariffs. If the US government eases its stance on tariffs, the market is likely to celebrate and move upward. However, if any new tariffs are imposed or a negative outlook emerges, the market could decline significantly.
Therefore, despite the positive tax changes, the market's direction ultimately depends on international developments and the major sectors responsible to them.
Regards
Yogesh Verma 🙂
