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The Impact of GST on Stock Market

Normally the question that arises, regarding the new tax regime is – how can a goods and services tax impact capital markets? However, the overarching impact of GST has been felt across sectors, including the Stock Market. With a sudden economic turnover having taken over the country, due to the new tax regime, multiple share prices have come to fore varying from their set conventional values; confounding investors in the process.

Hence, here’s taking a look at the ways, how GST has affected the Stock Market:

  • Impacting Dividends: Due to the increased tax returns, companies are battling hefty prices. This has resulted in a majority of corporations increasing their fixed pricing marks, followed by increased prices in the market. This has caused investors suffering, in terms of their fair share of dividends. In order to avoid unnecessary budget splitting, short-term losses have become a frequent scenario.
  • Splitting of Shares: Due to the varied nature of their shares, many MNCs are now seeing various taxes being levied on their goods. This is resulting in companies trying to make up for their losses, via the investors, hence, splitting component shares at this point in time, is not such a good idea. 
  • Positional Concept: With individuals being taxed at higher prices in most scenarios, investors are not applying the positioning method. As a result of this elimination, there has been an emergent trend of buying out the entire stock. Hence, this has taken a toll on the market investor, due to conventional patterns of short positioning/borrowing collaterals. 
  • Reduction in Competition: Due to multiple rates resulting in losses, many investors/freelancers are now releasing assets/liquidating stocks. This elimination in competition may be beneficial for investors but not for the market.

With the new GST regime, one can expect to see a slight bearish trend when it comes to the overall index. This may, however, differ across sectoral indices and sectors that are more GST sensitive may see a sharper decline than the others. This trend may be prevalent for a quarter or so and post that, the market shall stabilize as ambiguities decrease. This will hence create an optimistic viewpoint in the market participants, leading to the emergence of a bullish trend. Have thoughts about the impact of GST on the stock market? Tell us more about what you think, in the comments section below.

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