Indian market got a weak handover from US markets which retreated after retail inflation surged to a three-decade high, as per the latest data. Retail inflation as captured by Consumer Price Index (CPI) for October stood at 6.2% on an annualised basis, which was ahead of consensus estimate and touched a 31-year high.
“As CPI print has become more than 3x of Federal Reserve’s inflation target of 2%, apprehensions among investors seem to be rising about faster tapering by Federal Reserve and hike in interest rate sooner than expected 2HCY22. Notably, the 10-Year Treasury yield surged over 12bps yesterday to 1.55%, which also weighed on rate-sensitive sectors like technology. Federal Reserve, in its latest policy meet, continued to indicate higher inflation as transitory, which was fueled by supply-side issues and committed to remain patient for interest rate hikes,” says Binod Modi, Head Strategy at Reliance Securities.
At 10.01 am, BSE Sensex was 359 points or 0.59% lower at 59,994 levels with just 6 components of the 30-stock index in the green zone at this hour. The broader Nifty50 benchmark was down 103 points or 0.57% at 17,914. Only 8 of Nifty’s 50 stocks traded with gains at this hour.
Losses in HDFC twins, Infosys, ICICI Bank and Indian Oil pulled benchmark Nifty lower while gains in L&T, Titan Company, JSW Steel, Reliance Industries, and Tata Steel arrested the decline at the NSE index.
Broader markets are in losses as well and India Vix is up 3.52% currently indicating increased volatility.
Market participants in India are hopeful of the government’s effort to rein in inflation by cutting down fuel prices and reigning in prices of other commodities. The domestic market lacks any major cues and witnessed high volatility in recent weeks with no positive surprise from second-quarter earnings due to higher input costs.
“Nifty pulled back on anticipated lines without stretching much beyond 17960, but the ascent lacked the momentum to shrug off the overall bearishness that has weighed down prices for the last few days. However, despite such scepticism, the 17350 play is yet to receive the nod and chances of a collapse still appear low. Towards this end, we would have our downside marker at 17838 the recent low, and aim to pick up longs in the 17900 region,” said Geojit Financial Services in a pre-market note on Thursday.
Among other news, Cabinet Committee on Economic Affairs (CCEA) on Wednesday has hiked the price of ethanol by 80 paise-a-litre, a move that will benefit sugarcane farmers and can also lead to a higher blending of ethanol with conventional petroleum products.
Asian markets were mostly lower due to recent US consumer inflation which saw biggest rise in more than 10 years. US markets closed lower as equities reacted to higher than expected inflation numbers which pushed bond yields higher raising concerns that US Federal Reserve may tighten monetary policy sooner than expected. Europe closed higher as investors analysed earnings from Marks & Spencers and US inflation data.
