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Global:

There was central bank drama wherein the ECB cut its deposit rate deeper into negative territory and extended its asset buying by six months to March 17 and beyond. However, the twist was that its deposit rate cut by 10 bps to (-) 30 bps was smaller than expected. Moreover, the ECB did not increase the amount of government bonds it buys and the six-month extension of the programme also fell short of expectations. This led to a relief rally in the Euro.

However, we believe the Euro is likely to weaken further from current levels esp. after the probable rate hike by the Fed in its mid-December policy. The monetary policy divergence has been a key catalyst for Euro weakness and we expect the trend to continue in 2016 as well. We expect Euro to trade in the range of 1.0-1.05 vs. USD.

Domestic:

GST parleys continued after the ice between the government and the Congress party was broken a week back The expert panel led by the chief economic adviser has submitted its report on GST, details of which will be available on Monday. Its recommendations are likely to help the government cobble up a working solution to the stalemate. The panel has recommended a revenue-neutral rate (RNR) of ~15% with minimal exceptions and aberrations, which is far lower than what was being touted earlier. It has also weighed against the 1% additional tax on interstate sale of goods - a key demand from the Congress. However, the other Congress demand of enshrining the GST rate in the Constitution amendment bill itself has been rejected.

Markets, thus, will remain clued on to the wrangling over the GST and the fate of other key bills such as the Bankruptcy Bill and the Real Estate Bill - on which the RajyaSabha select committee recommendations have already come in.