Indian Indices Extend Losses; Telecom Sector Down 1.9%

Fri, 4 Aug 11:30 am

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After opening the day marginally lower, Indian share markets witnessed further losses. Sectoral indices are trading on a mixed note with stocks from the telecom sector and the healthcare sector witnessing maximum selling pressure. Consumer durables sector is witnessing buying interest.

The BSE Sensex is trading down 93 points (down 0.3%) and the NSE Nifty is trading down 12 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading down by 0.3%, while the BSE Small Cap index is trading down 0.2%. The rupee is trading at 63.69 to the US$.

The Bank of England (BoE) left interest rates unchanged at its monetary policy meet with only two of its monetary policy committee (MPC) members voting in favor of a hike this month.

The central bank also left its asset purchase programme unchanged.

The bank rate now remains at 0.25%, along with the asset purchase target at 435 billion pounds and the corporate bond target at 10 billion pounds.

In other news, US services sector data fell more than expected in July. As per the Institute for Supply Management (ISM), non-manufacturing index fell to 53.9 last month from 57.4 in June.

The data stoked doubts over whether the Federal Reserve would raise interest rates again in 2017. The stock markets now believe that its more likely the Fed won't raise rates again this year. Many reasons are put forward for this. US inflation is lower than expected. While the economic conditions could be better, the political situation remains tenuous.

However, with the recent measures at major central banks, it seems that the end of easy money is near. But it would take long before the central bank come to their senses and end this trend. As Asad Dossani, editor at Profit Hunter, writes in one of his recent articles...

• For the Fed and other central banks, it's tough to end easy money. Very tough. You'll read plenty of reasons why rates should go down or stay the same. You won't read much arguing for rate increases. And this is because rate increases create short-term pain, in exchange for long-term gain.
  
  In the short term, markets will fall. Volatility will go up. Economic activity may slow down too. But the most important long-term benefit is never mentioned. And this is the incentive to save more and borrow less. Higher interest rates encourage people to spend and invest out of their savings, rather than by borrowing. And this is extremely important for long-term economic prosperity.

In the news from commodity markets, crude oil is witnessing selling pressure today. Losses are on account of data that shows rising output from the US as well as producer club Organisation of the Petroleum Exporting Countries (OPEC).

According to a report by Thompson Reuters Oil Research, crude oil exports by the OPEC rose to record high levels in July. This was driven largely by soaring exports from the group's African members.

For the US, oil production has hit 9.43 million bpd, the highest level since August 2015 and up 12% from its most recent low in June last year.

Crude oil has been witnessing losses lately on concerns regarding the rising output from OPEC. Owing to the supply glut, crude oil prices have been remarkably silent over the last two years. Prices have remained within a tight range, rarely dropping below US$40 or rising above US$60. Volatility has crashed.

Crude Oil Trades Flat

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.

On the domestic front, falling oil prices bode well for the Indian economy. This we say is because India is hugely dependent on petroleum imports. India is the world's third-largest oil consumer.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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