D-Street Remains Cautious Ahead Of Fed Rate Hike

The NSE Nifty 50 index lost 0.88 per cent to 16,483.85, with a similar drop in S&P BSE Sensex to 55,268.49

Indian shares closed lower on Tuesday, with technology stocks bearing the brunt as investors turned wary of a likely sharp hike in U.S interest rate this week. The NSE Nifty 50 index lost 0.88 per cent to 16,483.85, with a similar drop in S&P BSE Sensex to 55,268.49. “While global growth has clearly entered a slower lane, including rising fears of U.S. recession, we look at several early anecdotes indicating possible worsening of domestic demand outlook,” BofA Securities said in a note released Tuesday. There are several emerging risks, including slowing growth, adverse policy interventions, FX depreciation and rising rates, BofA said, adding that earnings cuts were “imminent”.

“Benchmarks ended on a nervous note a day before the Fed announces its interest rate decision. Profit-booking continued to be the order of the day as investors preferred to remain on the sidelines ahead of the FOMC interest rate decision to trickle in tomorrow. The street suspects that the Federal Reserve will be hiking rates again by another 75bps,” said Prashanth Tapse – Research Analyst, Senior VP (Research), Mehta Equities.

While Asian shares gained on new Chinese plans to tackle its property crisis, Europe was subdued ahead of a likely 75 basis points Federal Reserve interest rate increase on Wednesday amid mounting worries of a gas crunch. In India,equities received a net USD 52.95 million of inflows this month, up to Monday, after heavy foreign outflows every month since November. For the month so far, the Nifty and the Sensex are up about 4.5 per cent each. Private lender Axis Bank slid 2.9 per cent on its worst day since mid-May despite a beat on quarterly profit, as analysts flagged soft loan growth.

The Nifty IT index slid 2.8 per cent and was the worst performer among sub-indexes, with IT major Infosys dropping 3.5 per cent. “Technically, on intraday charts, the Nifty has maintained a lower top formation and also formed a bearish candle on daily charts, which suggests further correction from the current levels. For traders, 16600 would act as an immediate resistance level and below the same, the correction wave is likely to continue till 16400-16350. A fresh uptrend rally is possible only after the 16600 breakout. Above which, the index could retest the level of 16700-16735,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities¬†

Food delivery firm Zomato tumbled 12.5 per cent to a record low, fintech firm Paytm slid 7.8 per cent, while online insurance platform PB Fintech dropped 4.1 per cent. Software company Ramco Systems plunged 11.1 per cent after the company said its quarterly loss widened. Financial services provider Bajaj Finserv cushioned some losses on the Nifty 50, adding 5.5 per cent,after announcing plans to issue bonus shares and split stock.

(With Reuters Inputs)