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Indian Shares Drop on caution Ahead of inflation data

Indian shares tracked Asian peers lower on Tuesday, with cautious investors awaiting a slew of inflation data due this week for clues on the scale of monetary tightening by central banks, while the rupee hit another record low.

The NSE Nifty 50 index (.NSEI) was down 0.4% at 16,154, as of 0504 GMT, while the S&P BSE Sensex (.BSESN) fell 0.3% to 54,220.50.

India’s retail inflation reading due later in the day and the U.S. consumer price index on Wednesday are keenly eyed by investors, as a spike in inflation would keep central banks on the path of aggressive rate hikes.

A Reuters poll showed India’s inflation will hold above the top of the central bank’s tolerance band for at least the rest of 2022, making several more interest rate hikes in the coming months all but inevitable. 

Global markets have turned a little volatile due to COVID-19-led shutdowns in some Chinese cities, and better-than-expected U.S. jobs data last week, which means that the U.S. Federal Reserve will go on with existing rate hikes, said Gaurav Dua, head of capital market strategy at Sharekhan.

Multiple Chinese cities, including the commercial hub of Shanghai, are adopting fresh COVID-19 curbs starting this week to rein in new infections after finding a highly-transmissible Omicron subvariant. 

“Now markets will be waiting for inflation numbers (and) that’s why we are seeing negative to range-bound moves across equity markets,” Dua said.

Meanwhile, the Reserve Bank of India (RBI) said on Monday it was putting in place a mechanism for international trade settlements in rupees, which banks will need prior approval to use. 

The RBI’s move comes as the Indian rupee touches all-time lows amid continued foreign portfolio outflows from domestic stock markets and a broadly stronger greenback.

Among individual shares, Ahluwalia Contracts (AHLU.NS) rose 4.6% after getting an order worth 1.50 billion rupees ($18.84 million), while Techno Electric & Engineering Co (TEEC.NS) dropped 5.4% after approving a share buyback.

Source By: Reuters