“Investors are likely to be in a wait-and-watch mode as all eyes will be on the U.S. Federal Reserve’s rate decision,” said Prashanth Tapse, research analyst at Mehta Equities.
Asian peers were also on tenterhooks ahead of the likely 75-basis-point Fed rate hike, while a profit warning from U.S. retailer Walmart dampened sentiment.
“After Walmart’s comments on inflation and growth, market jitters have increased ahead of the Fed policy meet, and that has spilled over into the domestic market despite a better than expected earnings season,” said Aishvarya Dadheech, a fund manager at Ambit Asset Management.
Meanwhile, after heavy foreign outflows every month since November, Indian equities have received a net $52.95 million of inflows this month till Monday. For the month so far, the Nifty and the Sensex are up about 4.5% each.
The Nifty IT index slid 2.3% and was the worst performer among sub-indexes, with IT major Infosys dropping 3%.
Helping cut losses on the Nifty 50 was a 3.7% rise in financial services firm Bajaj Finserv on plans to issue bonus shares and split its stock.
“The dark cloud on the global economic horizon is the threat of an imminent US recession impacting global economic growth. Jury is still out on whether the US slips into a recession or not. But a global growth slowdown appears inevitable. Wall Mart’s profit warning issued yesterday is an indication of the difficult days ahead for corporate earnings. Europe is the weakest geographical space in the world and China is struggling,” says Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Even though the Indian economy is resilient now, global growth slowdown will impact India too, he added.
“This means, from the fundamental perspective, there is a limit to market upside. The 1400 point rally in Nifty from its June lows has again stretched market valuations. Therefore, FIIs might again turn sellers to rallies,” said he.
Nifty 50 components Bajaj Auto, Asian Paints and Larsen & Toubro will report their results later in the day.
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