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After opening the day deep in the red, the Indian indices have continued to trade on a negative note. Sectoral indices are trading on a negative note with stocks from the capital goods, metal and realty sector witnessing maximum selling pressure.
The BSE Sensex is trading down 411 points (down 1.4%) and the NSE Nifty is trading down 134 points (down 1.5%). The BSE Mid Cap index is trading down by 2.2%, while the BSE Small Cap index is trading down 1.6%. The rupee is trading at 66.89 to the US$.
Boston Fed President Eric Rosengren recently stated that the US central bank faced increasing risk if it waited too long to raise interest rates. This revived hopes that the Fed will raise its interest rates in its monetary policy review which is scheduled on September 21-22.
The Fed's stance on rate hikes has fueled much volatility in the global markets of late. Last month, Fed Chair Janet Yellen voiced optimism about the US economy and anticipation that interest rate hikes are ahead. Yellen said that with a firm labour market in the US and with the Fed's outlook for economic activity and inflation, the case for an interest rate hike has strengthened in recent months.As for our views on the US interest rate, we believe that the market and the Fed place undue importance on just twenty-five basis points (0.25%). And this in turn leads to a loss of central bank credibility. Asad Dossani, editor at Daily Profit Hunter, explained the issue in his article, Twenty-Five Basis Points. He has also written on why these central bank policy measures are the definition of insanity and how one can trade such events by building a trading business.
In another news update from the domestic markets, the Union Finance Ministry notified the provisions of the Constitution Amendment Act that allows for setting up the Goods and Services Tax (GST) Council. A ministry notification stated that the Central Government appointed the 12th day of September, 2016 as the date on which the provisions of section 12 of the said Act shall come into force.
As per the provisions of the Constitution Amendment Act, the GST Council will have to be set up within 60 days of its notification.
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. Then three GST Bills (Central GST, Integrated GST, and State GST) stating the actual rates will be sent to Parliament and state assemblies for approval.
The above development marks as another step forward in the implementation process of GST. Last week, President Pranab Mukherjee gave his assent to the Constitution Amendment Bill on Goods and Services Tax (GST). This, along with the bill ratified by more than 50% of the state assemblies, has made GST a law. To know more about GST, please read Vivek Kaul's report - 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!