Indian Indices Trade on a Negative Note

Fri, 9 Sep 11:30 am

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After opening the day weak, the Indian indices registered further losses and continued to trade negatively. Sectoral indices are trading on a discouraging note with stocks from the <>auto, <> metal and realty sector witnessing maximum selling pressure.

The BSE Sensex is trading down 220 points (down 0.8%) and the NSE Nifty is trading down 70 points (down 0.8%). The BSE Mid Cap index is trading down by 0.7%, while the BSE Small Cap index is trading down 0.4%. The rupee is trading at 66.55 to the US$.

The European Central Bank (ECB) left its 1.7 trillion-euro stimulus programme unchanged at its policy meeting on Thursday. The Governing Council of the central bank also stood pat on interest rates and its asset purchases programme. It left the main refinancing rate at zero, the deposit rate at minus 0.4%, and asset purchases at 80 billion euros a month.

The decision came as a consensus among the policymakers. Policymakers at the meeting were of the view that there's no immediate danger to the euro-area recovery from risks including Britain's decision to leave the European Union (EU).

The Governing Council stated it expects the key ECB interest rates to remain at present or lower levels for an extended period of time. It further said that the monthly asset purchases of 80 billion euros are intended to run until the end of March 2017, or beyond, if necessary.

Soon after this move by the ECB, all focus had turned to ECB President Mario Draghi. Market participants were keeping tabs on whether Draghi will announce any technical adjustments to the ECB's quantitative-easing (QE) programme.

Draghi, however, disappointed the hopes for a QE and kept the plan unchanged until the planned March end-date. He said that the ECB was looking at options to enable it to pursue the money-printing programme.

While speaking at a conference, Draghi said he was concerned about persistently low eurozone inflation. One must note that the eurozone inflation has fallen short of the ECB's near 2% target for more than three years.

The ECB, in March, announced aggressive moves that lit a fire under European markets. It cut its main interest rate from 0.05% to 0% and cut its bank deposit rate from minus 0.3% to minus 0.4%. Four long-term loan schemes were also announced, with banks given incentives to boost credit growth with the help of cheaper rates. Borrowing terms under the scheme were announced as low as minus 0.04% rate on the deposit facility. This meant the ECB paying banks to take its cash if they show they are lending it to households and firms. Alongside these measures, the bank also expanded its quantitative easing program from 60 billion euros to 80 billion euros a month in order to boost inflation and revive a stuttering eurozone economy.

The above announcement is just a continuation of the central banks easy money policies. In the recent past, central banks across the world are trying to prod growth by operating near zero or negative interest rates and by introducing stimulus measures.

However, are these measures viable? Asad Dossani, editor of Daily Profit Hunter, calls these measures the definition of insanity. He has also written on how one can successfully trade such events and build a trading business.

In another major news update from the domestic markets, President Pranab Mukherjee has given its assent to Constitution Amendment Bill on Goods and Services Tax (GST). This, along with the bill ratified by more than 50% state assemblies, makes GST a law.

With this milestone achieved, all eyes are now set on the formation of the GST Council.

The GST council is a very important part of the implementation process. It will be the job of the council, which will be two-thirds represented by the states, to decide on the GST rate after which three GST Bills (Central GST, Integrated GST, and State GST) mentioning the actual rates will be sent to Parliament and state assemblies for approval. To know more about GST, please read Vivek Kaul's report titled GST & You: What the Media DID NOT TELL YOU About the GST.

As for market participants, the question is this: Will the landmark GST Bill make you go out there and buy stocks in large numbers? One of the editions of The 5 Minute WrapUp titled 'GST Approved: Time to Buy Stocks by the Fistful?' answers this question.

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

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