Of GST, Fed Minutes, and Top Cues to Watch Out Today

Thu, 6 Jul Pre-Open

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Indian stock markets finished their day with marginal gains on Wednesday. The BSE Sensex stood higher by 36 points, while the NSE Nifty stood higher by 24 points at the closing bell yesterday.

On the sectoral front, realty stocks, metal stocks, and energy stocks witnessed maximum buying interest. However, these gains were wiped off by losses seen in IT stocks and FMCG stocks.

GST and Its Impact on Broader Markets...

The above volatility in broader markets as well as specific sectors was seen on the back of rollout of Goods and Services Tax (GST).

The latest news on this front is Fitch ratings stating GST is likely to remove domestic trade barriers and boost revenue indirectly in the long term. This, as per the ratings agency, is because the tax regime will support the GDP growth and encourage tax compliance.

One shall note that with the changes in GST, the unorganised sector is forced to report and pay taxes on everything they sell. And this development is set to give a big boost to the organized sector.

As we wrote in a recent edition of The 5 Minute WrapUp:

• And if the unorganised sector will be forced to report and pay taxes on everything they sell, the price differential with the organised sector is really going to narrow, giving a big boost to the latter.
  
  This is perhaps why - when most of us are nervous about the roll out of this big-bang reform - stock markets are surging.

We believe that the above shift towards formalization bodes well for the government, consumers, and the economy at large.

In the News from the Global Financial Markets...

Stock market participants will be taking cues from the Fed minutes of the June 13-14 policy meeting.

The Fed, in its meeting held last month, raised its benchmark interest rate by 25 basis points to 1.25%. This was the third such increase in six months - and a message of confidence from the Fed in the strengthening of the US economy.

The Fed now sees another three-quarter-point rate hike in 2018, in line with the projections from March.

US Federal Reserve rate hikes generally have a negative impact on emerging economies. But India is currently seen as better equipped than other emerging markets to ride the impact of higher US interest rates. That's largely because of its stronger economic growth and impressive foreign exchange reserves of more than US$300 billion.

Foreign portfolio investors may not drain funds from India in a knee-jerk reaction to the Fed rate hike, as that would mean missing out on the enormous growth opportunities Indian markets offer.

Top Cues to Watch Out Today

The Metropolitan Stock Exchange of India (MSEI) stated it will extend the closing time of trading hours on its equity capital market segment to 5:00 pm from the current 3:30 pm.

The above change is proposed to be implemented form tomorrow and market participants are watching for further cues from the MSEI on this front.

Investors are also tracking the launch of the much awaited 4G VoLTE featured phone from Reliance Jio - the subsidiary of Reliance Industries. Many expect the above launch would usher in another wave of disruption in the telecom market.

On the commodity front, market participants will keep an eye out for the latest data on crude oil inventories.

Reports during the start of this week showed drilling activity in the US falling for the first time in months. The news aided crude oil prices, which have been on the rise since past few days.

To keep a tab on the movements in crude oil and other commodities, you can read the stock market commentary from the Daily Profit Hunter team. Their commentary tracks the developments in the global economy as well as stock, currency and commodity markets.

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