Sensex, Nifty May Follow Global Peers Lower On US Rate Hike Worries

Indian shares look set to join a global sell-off on Thursday amid worries about higher yields and expectations of more aggressive rate hikes in the United States.

The Fed’s next monetary policy meeting is scheduled for May 3-4, with CME Group’s FedWatch Tool currently indicating a 78.8 percent chance of a 50 basis point rate hike.

Closer home, the RBI’s three-day MPC meeting will end on Friday and analysts say there is crying need for the central bank to revert to its mandated role of ensuring price stability.

Benchmark indexes Sensex and the Nifty fell around 0.9 percent and 0.8 percent, respectively on Wednesday to extend losses for a second day running, with IT stocks and HDFC twins pacing the decliners.

The rupee settled down 47 paise at 75.76 against the dollar after Fed members spoke about balance sheet reduction along with rate hikes.

Asian markets were moving lower this morning and the U.S. yield curve steepened while oil recovered some ground after falling sharply overnight on data showing a larger than expected increase in crude inventories last week and the International Energy Agency’s decision to release 120 million barrels of oil from its reserves.

U.S. stocks fell overnight after minutes from the Fed’s March meeting revealed discussions on reducing the size of the central bank’s balance sheet over time in a predictable manner.

Participants generally agreed reducing the balance sheet from May, along with a 50 bps rate hike. The monthly roll-off would consist of $95 billion worth of Treasuries and mortgage bonds.

The tech-heavy Nasdaq Composite fell 2.2 percent, the S&P 500 declined 1 percent and the Dow eased 0.4 percent.

European stocks fell the most in three weeks on Wednesday as tech and other growth shares were hit by a surge in bond yields following hawkish comments from Fed Governor Lael Brainard and Philadelphia Fed President Patrick Harker.

Weak economic data from Germany and uncertainty ahead of Sunday’s first round presidential vote in France also weighed on markets.

The pan European Stoxx 600 gave up 1.5 percent. The German DAX lost 1.9 percent and France’s CAC 40 index plummeted 2.2 percent while the U.K.’s FTSE 100 shed 0.3 percent.