Shares fell and the 10-year bonds hit a two-year low after Reserve Bank of India’s latest policy meeting revealed inflation concerns, while the rupee was trading at its weakest level against the dollar since November.
The minutes from the meeting showed the central bank’s monetary policy committee members were worried about increased inflation as well as ambiguity regarding the strength of an economic recovery. The committee had voted 5-1 to keep the policy rate on hold and maintained its neutral monetary policy stance.
“The minutes of the RBI meeting suggest RBI is still concerned about inflation … all these have weakened sentiment further,” said Neeraj Dewan, director, Quantum Securities.
The Nifty was trading 0.37 percent lower at 10,359.20 as of 0537 GMT, dragged by Reliance Industries Ltd, down 0.6 percent and HDFC Bank, down 0.7 percent. The Sensex was 0.27 percent lower at 33,754.13.
“Domestic sentiment has become weak and global sentiment is also rubbing off to some extent,” Dewan added.
Most of the Asian share markets followed S&P 500 futures lower as speculation of faster increase in U.S interest rates soured risk appetite on the global level.
The yield on the benchmark 10-year U.S. Treasury note hit a four-year high overnight and the Dow ended Wednesday down 0.67 percent.
India’s benchmark 10-year bond yield rose as much as 11 bps in early trade to 7.82 percent, the highest since late February 2016 while the partially convertible rupee was trading at 65.0350 per dollar after hitting 65.0850, a three-month low.
In equities, Bharat Petroleum Corp Ltd was the top percentage loser, falling 4.6 percent after going ex-dividend.
Among financials, fraud-hit Punjab National Bank continued to witness sell-off, falling as much as 3 percent. Jefferies has cut its target price on the stock.