Fed rate hike, GST to keep Indian markets nervous this week
Other | Photo Credit: Reuters

The US Federal Reserve’s widely expected interest rate hike this week is likely to keep Indian stock markets jittery with uncertainty over the passage of the Goods and Services Tax bill in the Rajya Sabha adding to the nervousness.

While the path for the GST bill seemed cleared after a report by the finance ministry’s chief economic advisor suggested a revenue neutral rate of 15.5 per cent, protests by opposition parties have dimmed hopes of the bill getting passed in this session of parliament.

“We expect some respite in the coming week as, after much speculation, things will now be clear over the interest rate scenario in the US,” said Jayant Manglik, president of retail distribution at Religare Securities. “After that event, markets will be relaxed at least on one front and focus over progress on the GST bill’s passage in parliament.”

The Indian stock market lost two percentage point last week as protests in the Rajya Sabha kept investors guessing about the future of the GST. The market also felt the impact of withdrawal of funds by foreign institutional investors.

There was some good news last week with industrial production clocking 9.8 per cent growth in October, the highest in five years, helped by a spurt in manufacturing output to a four-year high.

Indian markets will also watch for inflation data later on Monday.

The median forecast of a poll of 17 economists last week showed consumer inflation edging up to 5.4 per cent in November. While inflation is set to be below the 6 per cent target in January the number will be higher than the 5 per cent target set for FY2016-17 set by the central bank.

The risks are expected to be on the upside given the government is set to increase salaries and allowances of 50 lakh central government employees from 2016.

Wholesale prices will likely fall 2.54 per cent in November, according to the VCCircle survey. Another data release for the week will be trade numbers for November. Exports are likely to continue their slide given the global slump in trade.

The rupee could also be volatile this week, though the Fed decision may calm some nerves. The Indian currency was at a two-year low on Friday and ended the week at Rs 66.88 against the greenback.

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