Indian shares were little changed on Wednesday, helped by oil and gas explorers, while a red hot inflation reading for March fuelled expectations of a sooner-than-anticipated interest rate hike and pushed bond yields to a near three-year high.
The NSE Nifty 50 index (.NSEI) was up 0.1% at 17,540, as of 0525 GMT, while the S&P BSE Sensex (.BSESN) was flat at 58,542.23.
“Macros are quite a concern. With rising yields, foreign institutional investor flows are also negative. We are into the results season. There is cost inflation for several firms,” said Anita Gandhi, a whole-time director at Arihant Capital Markets .
Refinitiv data showed that foreign investors sold equities worth $1.02 billion in the last four trading sessions.
Meanwhile, India’s retail inflation accelerated to near 7% year-on-year in March, its highest in 17 months and above the upper limit of the central bank’s tolerance band for a third straight month.
“Sharply higher than expected March inflation reading further increases the challenge for the MPC (Monetary Policy Committee) … We assign a very high probability of a 25 basis points rate hike in the June policy along with a stance change,” Kotak Mahindra Bank’s Senior Economist Upasna Bhardwaj said.
The inflation spike also pushed India’s benchmark 10-year bond yield to its highest since May 22, 2019, on Wednesday.
Aiding support to the markets, tight oil supply worries boosted explorers Oil and Natural Gas Corp (ONGC.NS), Oil India (OILI.NS), and GAIL India (GAIL.NS) — up between 1% and 3% while surging coal demand also lifted Coal India (COAL.NS) by 2.3%.
Indian fertilizer stocks jumped 2%-6% as the government was likely to consider subsidy hikes later in the day.