Indian shares fell more than 1 percent to post their biggest loss in three weeks on Thursday, tracking weak global markets as caution prevailed about the possibility of an interest rate hike by the US Federal Reserve as early as June. The broader NSE index closed down 1.1 percent at 7,783.40, posting its biggest percentage loss since April 28, while the benchmark BSE index ended down 1.19 percent at 25,399.72.
Minutes released on Wednesday showed Fed officials said it would be appropriate to raise interest rates in June if economic data points to stronger second-quarter growth as well as firming inflation and employment. The minutes come a day after comments from Fed officials had appeared to signal potential rate hikes. Reflecting these concerns, Asian stocks fell while the dollar index hovered just below a seven-week high, boosted by sharply higher US Treasury yields.
"Fed rate hike is a worry not just for India but for all emerging markets and it is this uncertainty which is turning markets more volatile," said Daljeet Kohli, director and head of research at IndiaNivesh Securities. Public sector lenders Punjab National Bank and Corporation Bank fell 2 percent and 4 percent respectively, after reporting quarterly losses on Wednesday. Ten of the 17 state-run banks that have reported March-quarter results posted a combined net loss of 153.2 billion rupees ($2.3 billion).
Among other losers, Castrol India fell 3 percent after majority shareholder BP sold partial stake in the company. However, Parag Milk Foods jumped 14 percent in its market debut. The dairy-based branded consumer product company's IPO was oversubscribed 1.9 times on the final day of the offer, which ended on May 11.