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Indian Indices Extend Downtrend
Wed, 3 Aug 11:30 am

After opening the day marginally lower, the Indian indices registered further losses and went on to trade in the red. Sectoral indices are trading on a discouraging note with stocks from the FMCG, power and realty sector witnessing maximum selling pressure.

The BSE Sensex is trading down 237 points (down 0.9%) and the NSE Nifty is trading down 62 points (down 0.7%). The BSE Mid Cap index is trading down by 1.3%, while the BSE Small Cap index is trading down 0.9%. The rupee is trading at 66.91 to the US$.

In a news from the global markets, the Reserve Bank of Australia (RBA) reduced its interest rates Tuesday to a record low. It reduced the cash rate by 25 basis points to 1.5%. This, the bank stated, was in order to spark historically weak inflation. This was recorded as the first cut since May and second such move in the year.

Official figures last week showed core annual inflation hit 1.5% during the second quarter. This was noted as well below the RBA's 2% to 3% target band. The banks policymakers are of the view that low inflation could feed into wage and price - setting behavior of businesses and households.

Also, the above move was in a response to a slowing jobs market in Australia. It was reported that the country created roughly 7,000 jobs a month on average this year, compared with more than 30,000 a month in the second half of 2015.

Most of the commentary by the RBA focused on the housing market there. It stated diminished concerns around lower interest rates fanning another surge in property prices. The tone of the statement was that supervisory measures have strengthened lending standards in the housing market.

The above development is the latest show that the central banks around the globe are depicting. Last week, there were two major announcements from the central banks of Japan and the US. While the Federal Reserve stood pat, the Bank of Japan (BOJ) decided on a modest dose of monetary stimulus. The fiscal and monetary authorities in Japan had recently announced more plans over the past few days to spur inflation in hopes of driving the broader economy.

Being on the topic of central banks, a recent entry in Vivek Kaul's Diary explains how central bankers make us poorer. Also, Asad Dossani, editor of Daily Profit Hunter, has written on how to successfully trade political events such as above.

Moving on to the news from the steel sector, India's leading steel makers have sought an extension of the minimum import price (MIP) imposed on steel by six months to a year. This comes as the current MIP regime is due to end this week.

Reportedly, the demand is put forward by companies such as JSW Steel, Tata Steel, Essar Steel and SAIL. The companies are also apprehensive as a Japanese industry delegation has accused India of violating WTO (world trade organisation) rules by providing protection to its steel industry through MIP. In response, the Indian steel industry has refuted this claim, asserting that it was legitimate since it came under one of the three exceptions as per GAAT rules to restrict surging imports.

One must note that the government of India on February 5, 2016 had imposed the MIP on 173 steel products. This was done to promote domestic growth of steel manufacturing industry. Also, government has made efforts to impose anti-dumping duty, safeguard duty on imported steel products. This is likely to further restrict and reduce dependence on externally manufactured steel products.

MIP is the minimum price per tonne that firms have to pay while importing products. To know more about MIP and its impact on steel industry, do read this interesting 5 Minute WrapUp Premium (subscription required).

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