Wednesday, July 6

Indian shares fall on inflation woes, prospect of aggressive Fed hikes

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BENGALURU — Indian shares fell for a second straight session on Wednesday, dragged down by financials, as surging inflation and prospects of aggressive rate hikes by the US Federal Reserve weighed on investor sentiment.

The NSE Nifty 50 index declined 0.7% to 17,826 by 0541 GMT and the S&P BSE Sensex fell 0.83% to 59,678.85, in line with global markets after hawkish comments from a Fed policymaker.

Fed Governor Lael Brainard said overnight that she expected a combination of interest rate hikes and a rapid balance sheet runoff to take US monetary policy to a “more neutral position” later this year.

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“Markets will be remaining on a cautious zone ahead of the Fed minutes, as well as the RBI’s policy meeting,” said Prashanth Tapse, vice president (research), Mehta Equities.

“The inflation is a new war for the whole world for another six to eight months, (and) that would keep emerging markets like India under pressure. Markets will be very volatile because of this and we may see the impact of it in companies’ Q1 numbers.”

Oil marketing companies in India continued to raise pump prices on the back of elevated global crude prices, sparking worries of an acceleration in inflation.

The Reserve Bank of India’s three-day monetary policy meeting begins on Wednesday, while the Fed will release later in the day minutes of its last meeting, which investors will scrutinize for clues on the prospect of a 50 basis point hike at its next meeting in May.

The Nifty Bank index fell 1.2% and the finance index dropped 1.4%, falling for a second straight session after a more than 4% jump on Monday.

Shares of Paytm parent One 97 Communications rose 3% after the digital payments firm said it should be able to achieve a breakeven for a key metric of profitability in one-and-a-half years. (Reporting by Nallur Sethuraman in Bengaluru; editing by Uttaresh.V and Subhranshu Sahu)