Closing Bell

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International Market Update (27 Feb)

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MCX Support and Resistance Level (27 Feb 2019)

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GST cut to boost sales of under-construction flats; no ITC may hit builders' profit margin: Moody's

Credit rating agency Moody's on Wednesday said the GST rate cut on under-construction flats will boost housing sales, but may hit profit margins of builders with withdrawal of input tax credit.

The GST Council had on Sunday decided to cut goods and services tax (GST) rate on affordable homes to 1 per cent without input tax credit (ITC) from earlier 8 per cent with ITC.

The GST on under-construction flats, which is not under the affordable housing segment, has been reduced to 5 per cent without ITC from earlier 12 per cent with ITC.

"The reduction in GST is credit positive for India's property developers...because the reduction in tax will boost demand and increase sales of properties under construction," Moody's Investors Service said in a statement.

"India's real estate sector has weathered difficulties in the last few years amid price reductions from a glut of inventory and lackluster demand. The reduction in GST will improve housing affordability as the amount to be paid by a potential house buyer will be reduced, which will increase demand for property," it added.

The reduction in GST rate on affordable housing is in line with the government's increased focus on this segment, Moody's said.

"The new GST measures eliminate the ability to claim input tax credit, which may hit the profitability of the developers," the rating agency said.

Currently, the developers are able to reduce the tax liability when it makes a sale by claiming tax paid on goods and services required for the construction of properties. "This will further impact developers' profit margins that are already under pressure."

Moody's said that the developers have the option to mitigate this loss by increasing prices slightly given that overall pricing for the customer has reduced with lower GST.

Meanwhile, Fitch Ratings said the move to reduce the GST on under-construction properties and expand the scope of the affordable-housing category would improve affordability and support demand.

"We believe this will boost consumer sentiment and cut transaction costs, which can be as high as 18 per cent in Mumbai after including other taxes, such as stamp duty, surcharge and registration fees," it said.

"The measure also withdraws input-tax credits for developers, but we still expect marginal savings on overall transaction costs and more so for affordable housing as well as improved buyer confidence, as the measure eliminates ambiguity as to whether property developers are adequately passing on input-tax credit to buyers," Fitch said.

Source:https://www.moneycontrol.com/news/business/economy/gst-cut-to-boost-sales-of-under-construction-flats-no-itc-may-hit-builders-profit-margin-moodys-3589171.html

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Here's how market reacted after major terrorist and military events in past 20 years

In an unprecedented air strike across the Line of Control (LoC), the Indian Air Forces bombed terrorist training camps in Balakot on February 26. Sensing a brewing geopolitical tension, the market panicked and witnessed deep cuts through the day. At close, the Sensex fell 239.67 points to 35,973.71, and Nifty was down 44.80 points at 10,835.30.

February 26 “pre-emptive strike” followed the attack on CRPF soldiers in Pulwama of Jammu and Kashmir on February 14. In the suicide bomb attack, 40 soldiers were killed, leaving a nation of 1.3 billion people mourning.

Market’s reaction to the Pulwama attack was also panic-stricken as it shed about 0.2 percent during the trade on February 15. But, the point to note is that the market was already in a downtrend as it had fallen for the previous five sessions as well. And it kept falling till February 19.
However, not all terrorist attacks or military actions lead to losses in equity market. Last two decade’s data suggests many-a-times, the market is unaffected by the news of terrorist attacks or military actions, at least immediately.

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Geopolitical tensions drag Nifty below 10,800 at open, Sensex falls 200 pts; banks under pressure

Market Opens: The geopolitical tension on Indo-Pak border has pulled the Nifty below 10,800 in the opening trade, while Sensex is down over 200 points.

The Sensex is down 241.49 points at 35971.89, while Nifty is down 81.60 points at 10798.50. 
About 171 shares have advanced, 780 shares declined, and 41 shares are unchanged. 

Top gainers are Bharti Infratel, Asian Paints and HCL Tech, while losers include Yes Bank, SBI, Indiabulls Housing, JSW Steel, Hero Moto, ONGC, ICICI Bank, Hindalco, Vedanta, Bajaj Fiance and Rain Industries, Jet Airways and Spicejet.

Rupee Opens: The Indian rupee slipped in the early trade on Tuesday. It opened lower by 28 paise at 71.26 per dollar versus previous close 70.98.

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Opening Bell

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