Fed rate hike-led inflation worries spook investors

Mumbai: Market benchmarks stayed on the back foot for the second session on the trot on Thursday, in tandem with a lacklustre trend overseas after the US Fed delivered the fourth straight 75-bps interest rate hike to tame scorching inflation. The 30-share BSE Sensex declined 69.68 points or 0.11 per cent to settle at 60,836.41. During the day, it tanked 420.95 points or 0.69 per cent to 60,485.14. Similarly, the broader NSE Nifty dipped 30.15 points or 0.17 per cent to end at 18,052.70.

Tech Mahindra was the top laggard in the Sensex pack, dropping 2.66 per cent, followed by PowerGrid, NTPC, Infosys, Wipro, M&M and TCS. In contrast, SBI, Titan, Bharti Airtel, Tata Steel, HUL and IndusInd Bank were among the winners, climbing up to 1.89 per cent. "The US Fed hiked rates by 75 bps to a range of 3.75 to 4 per cent, which is at its highest level since 2008. However, it also indicated a tapering off of subsequent hikes in order to bring inflation back to around the 2 per cent target. "This could be indicative of a similar position taken by the central bank in India to continue raising the repo rate in lower increments going forward to keep a check on inflation until global macros reach some level of stability," said Karan Desai, founder, Interface Ventures.

The Reserve Bank's rate setting panel on Thursday met to finalise a report for the government on why it failed to keep retail inflation below the target of 6 per cent for three consecutive quarters since January this year, said sources.

"(Fed Chair Jerome Powell) cautioned that the desired Fed rate level is higher than expected, even though he indicated a rate hike of less than 75 bps in the upcoming meetings. On the back of concerns about the US recession, IT stocks led the domestic selloff, while FII support helped limit the losses," said Vinod Nair, head (research) at Geojit Financial Services.

Foreign Institutional Investors (FIIs) were net buyers on Wednesday as they bought shares worth Rs 1,436.30 crore, as per exchange data.