Sensex, Nifty Set To Decline On Interest Rate, US Bank Worries

Indian shares look set to open lower on Wednesday as investors react to weak global cues and domestic inflation and trade deficit data.

Data from the National Statistical Office revealed on Monday that India’s consumer price inflation rose more-than-expected in July to the highest level in more than a year amid high food prices, especially vegetables.

The consumer price index climbed 7.44 percent year-over-year in July, faster than the revised 4.31 percent rise in June. Economists had forecast the inflation rate to increase to 6.4 percent.

Moreover, inflation surpassed the Reserve Bank of India’s tolerance band of 2-6 percent for the first time in five months and was above the medium-term target of 4.0 percent.

Separate data showed that India’s wholesale prices declined for the fourth successive month in July, though at a slower-than-expected pace.

The wholesale price index dropped 1.36 percent year-over-year in July, slower than the 4.12 percent decrease in June. Economists had expected a 2.7 percent fall.

India’s merchandise trade deficit slightly widened to $20.67 billion in July, as compared to $20.13 billion in June. The trade deficit data, however, narrowed in the month on a year basis.

Financial markets were closed on Tuesday on account of Independence Day.

On Monday, benchmark indexes Sensex and Nifty recovered from an early slide to end marginally higher, while the rupee hit a 10-month low before closing down 10 paise at 82.95 against the dollar.

Asian markets followed Wall Street lower this morning on worries about the Chinese economy and fears that the Federal Reserve may keep interest rates higher for longer.

Copper prices hit a two-month low and oil extended overnight losses on China demand concerns, while gold traded slightly above $1,900 per ounce against the backdrop of risk aversion.

U.S. stocks hit a five-week low overnight while longer-term Treasury yields hit their highest levels this year after data showed retail sales rose more than expected in July, denting dovish Fed bets.

The sell-off was compounded by weak economic data from China and a warning from Fitch that U.S. banks, including JPMorgan Chase, could be downgraded.

The Dow dropped 1 percent, the S&P 500 declined 1.2 percent and the tech-heavy Nasdaq Composite fell 1.1 percent.

European stocks closed notably lower Tuesday on concerns about the Chinese property sector and an uncertain outlook for interest rates.

The pan European STOXX 600 shed 0.9 percent. The German DAX gave up 0.9 percent, France’s CAC 40 lost 1.1 percent and the U.K.’s FTSE 100 slumped 1.6 percent.

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