(RTTNews) – Indian stocks are likely to follow global peers lower on Tuesday as bets mount that the Federal Reserve could hike 75 basis points at one of the summer meetings. The Federal Reserve is expected to announce its latest monetary policy decision on Wednesday, with market participants preparing for tighter forward guidance to fight inflation.
Goldman Sachs has forecast a 75 basis point rate hike for this week’s meeting. There are fears that tighter monetary policy could trigger a period of stagflation or an outright recession.
On the domestic front, there is some recovery as government data released after the market closed on Monday showed India’s retail inflation fell to 7.04 percent in May from 7.79 percent in April, mainly on the back of falling food prices.
However, CPI inflation is still well above the Reserve Bank of India’s tolerance range of 2-6 percent.
The RBI is well ahead of the curve on inflation management, but two more rate hikes are likely in August and October, according to SBI research report Ecowrap.
Benchmark indexes Sensex and Nifty fell 2.7 percent and 2.6 percent respectively on Monday, while the rupee settled 11 paise lower to a record low of 78.04 against the dollar.
Asian markets followed Wall Street lower, the dollar surged and bond yields hit two-decade highs, while oil prices were largely flat despite the possibility of fresh COVID-19 restrictions in China.
US stocks plunged into a bear market on Monday and Treasury yields rose as investors continued to worry about stubbornly high inflation and the prospect of aggressive monetary tightening by central banks.
The Dow fell 2.8 percent, the tech-heavy Nasdaq Composite fell 4.7 percent and the S&P 500 fell 3.9 percent to its lowest closing level in over a year.
European stocks also fell on Monday on disappointing UK growth data and news of a “wild” COVID-19 outbreak in Beijing’s most populous district, Chaoyang.
The pan-European Stoxx 600 fell 2.4 percent to its lowest level since March 7. Germany’s DAX fell 2.4 percent, France’s CAC 40 index lost 2.7 percent and Britain’s FTSE 100 fell 1.5 percent.
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