By Bharath Rajeswaran
BENGALURU (Reuters) -Indian shares eased off record highs on Wednesday, dragged down by information technology and pharma stocks in the run up to the U.S. Federal Reserve’s rate decision, due in a few hours.
The NSE Nifty 50 shed 0.16% to 25,377.55, while the S&P BSE Sensex fell 0.16% to 82,948.23.
Both the benchmarks rose about 0.25% each to all-time highs during the session, before reversing gains.
Information technology companies, which earn a significant share of their revenue from the U.S., lost 3% to post their worst session in six weeks.
The Fed is widely expected to lower rates, but the size of the cut, whether 25 basis points or 50 bps, was not clear. The odds of a 50-bps cut climbed to 65% from 34% last week.
While a bigger cut will likely see foreign funds shifting to emerging markets such as India in search of higher returns, it has prompted fears that the Fed may have begun its easing cycle a little too late, at the cost of economic growth.
The Fed’s reason for its decision and commentary on future policy will likely influence the near-term trajectory of Indian equities in terms of foreign inflows and the outlook for the IT and pharma sectors.
The Nifty pharma index lost 1.5%. In all, nine of the 13 major sectors declined, on the day.
However, the highest weighted financials sector added 1.4%, capping benchmark losses.
Despite markets holding ground near all-time high levels driven by liquidity, there is a gradual churn towards sectors with cheaper valuations, said Hemang Kapasi, head of equities at Sanctum Wealth.
Non-bank lender Bajaj Finance rose 3.6% after Morgan Stanley reiterated “buy” on attractive valuations.
The broader, more domestically-focussed small- and mid-caps lost about 0.4% and 0.7%, respectively.
“Some traders took profits at record high levels today, which caused the intraday drop,” said Rupak De, senior analyst at LKP Securities.
($1 = 83.6940 Indian rupees)
(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Savio D’Souza, Nivedita Bhattacharjee and Sumana Nandy)
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