Sensex, Nifty Set To Extend Losses Amid Global Selloff

(RTTNews) - Indian shares look set to follow global peers lower on Tuesday amid growing bets that the Federal Reserve may increase rate by 75 bps in one of the meetings in the summer. The Federal Reserve is scheduled to announce its latest monetary policy decision on Wednesday, with market participants bracing for tougher forward guidance in an effort to combat inflation.

Goldman Sachs has forecast a 75-basis point interest rate hike at this week's meeting. It is feared that tighter monetary policy could trigger a period of stagflation or an outright recession.

There is some respite on the domestic front as government data released after market hours on Monday showed that India's retail inflation eased to 7.04 percent in May as against 7.79 percent in April, mainly on account of softening food prices.

However, the CPI inflation is still way above the Reserve Bank of India's tolerance band of 2-6 percent.

The RBI is far ahead of the curve in managing inflation, but two more rate hikes are likely in August and October, according to the SBI's research report 'Ecowrap'.

Benchmark indexes Sensex and the Nifty plunged 2.7 percent and 2.6 percent, respectively on Monday while the rupee settled 11 paise lower at a record low of 78.04 against the dollar.

Asian markets followed Wall Street lower, the dollar surged and bond yields struck a two-decade high while oil prices were largely unchanged despite potential new COVID-19 curbs in China.

U.S. stocks plunged into a bear market on Monday and government bond yields soared as investors continued to fret over stubbornly high inflation and the prospect of aggressive monetary tightening by central banks.

The Dow tumbled 2.8 percent, the tech-heavy Nasdaq Composite plummeted 4.7 percent and the S&P 500 gave up 3.9 percent to reach their lowest closing levels in over a year.

European stocks also sank on Monday on disappointing U.K. growth data and news of a "ferocious" COVID-19 outbreak in Beijing's most populous district of Chaoyang.

The pan European Stoxx 600 tumbled 2.4 percent to its lowest since March 7. The German DAX lost 2.4 percent, France's CAC 40 index declined 2.7 percent and the U.K.'s FTSE 100 fell 1.5 percent.