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Indian equity benchmarks edged lower by over half percent on Wednesday, following intense selling in Power Grid, Indusind Bank and Reliance Industries taking cues from subdued trading in other Asian markets. Benchmarks made cautious start, as Global forecasting firm Oxford Economics has said retail inflation spike in May might cause the RBI to revisit its focus on growth risks, adding that a rate hike is still unlikely this year. It stated that the underlying dynamics of the May inflation print augur caution and the recovery remains on uncertain ground and with fiscal support in retreat, the RBI will likely be hesitant to remove policy accommodation anytime soon. Selling further crept in after State Bank of India's research division said that driven by several global and domestic factors, inflation may remain elevated in the coming months. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI, said that faster-than-anticipated and robust recovery in some advanced countries is likely to exert upward pressure on international commodity prices, including crude oil.

Trading sentiments remained weak in late afternoon session even as a private report stated that financial wealth in India grew 11% to $3.4 trillion in 2020 despite the coronavirus pandemic. The 11% growth in financial wealth was at par with the compounded annual growth rate for the five years to 2020. Market participants also paid no heed towards data showing that India’s merchandise exports rose by 69.35% in May 2021 as compared to same period of last year, on account of healthy growth in sectors such as engineering, petroleum products and gems and jewellery, even as trade deficit dropped to an eight-month low of $6.28 billion. Exports stood at $19 billion in May last year and at $29.85 billion in May 2019.  Meanwhile, the government has simplified the registration process for micro, small and medium enterprises (MSMEs) and they will now only need to furnish PAN and Aadhaar to register.

On the global front, Asian markets ended mostly lower on Wednesday as investors refrained from making big bets ahead of the U.S. Federal Reserve's policy meeting later in the day. Amid the backdrop of growing evidence of pricing pressures building in the economy, investors await the U.S. central bank's comments on inflation and stimulus outlook. European markets were trading mostly in green even as data from the Office for National Statistics showed that U.K. consumer price inflation accelerated to 2.1 percent in May from 1.5 percent in April. This was above economists' forecast of 1.8 percent and the Bank of England's target of 2 percent. Back home, on the sectoral front, insurance stocks were in focus as the DPIIT notified the government's decision to increase the FDI limit in the insurance sector under the automatic route to 74 per cent from 49 per cent earlier. Pharma stocks’ too were in watch with Fitch Ratings’ report that Indian pharmaceutical companies' sales will grow robustly in the financial year ending March 2022 (FY22) as sales normalise in categories affected by the pandemic in previous year.

Finally, the BSE Sensex fell 271.07 points or 0.51% to 52,501.98, while the CNX Nifty was down by 101.70 points or 0.64% to 15,767.55.   

The BSE Sensex touched high and low of 52,816.31 and 52,425.57, respectively and there were 8 stocks advancing against 22 stocks declining on the index.   

The broader indices ended in red; the BSE Mid cap index fell 0.95%, while Small cap index was down by 0.68%.

The top gaining sectoral indices on the BSE were FMCG up by 0.45%, IT up by 0.27%, TECK up by 0.10% while, Metal down by 2.58%, Industrials down by 1.62%, Energy down by 1.43%, Capital Goods down by 1.38%, Power down by 1.33% were the top losing indices on BSE.

The top gainers on the Sensex were Nestle up by 1.66%, NTPC up by 1.61%, ONGC up by 1.04%, Bajaj Finserv up by 0.77% and Hindustan Unilever up by 0.75%. On the flip side, Power Grid down by 2.18%, Indusind Bank down by 1.92%, Reliance Industries down by 1.69%, Larsen & Toubro down by 1.34% and Bajaj Finance down by 1.26% were the top losers.

Meanwhile, global forecasting firm Oxford Economics has said retail inflation spike in May might cause the RBI to revisit its focus on growth risks, adding that a rate hike is still unlikely this year. It stated that the underlying dynamics of the May inflation print augur caution and the recovery remains on uncertain ground and with fiscal support in retreat, the RBI will likely be hesitant to remove policy accommodation anytime soon.

It said that given the evidence from last year, when supply side disruptions had led to an unanticipated spike in inflation, such developments may partly be attributed for the inflation pick-up in May. However, it said ‘as we have highlighted, the 2021 lockdowns are not as stringent; and have allowed for greater movement of people, goods and vehicles. This suggests that other factors, such as the passthrough from WPI (Wholesale Price Index) to CPI (Consumer Price Index) and demand-side pressures, are at play as well.’

It mentioned the April industrial production growth print surprised to the upside. It said positive base effects notwithstanding, industrial production grew 1.1 per cent month-on-month seasonally adjusted in April after rising 2.2 per cent in March. This was led by continued expansion of manufacturing output.

The CNX Nifty traded in a range of 15,880.85 and 15,742.60 and there were 9 stocks advancing against 41 stocks declining on the index.

The top gainers on Nifty were Tata Consumer Products up by 2.11%, Nestle up by 1.51%, ONGC up by 1.08%, NTPC up by 1.02% and Hindustan Unilever up by 0.61%. On the flip side, Adani Ports & SEZ down by 7.86%, Tata Steel down by 2.92%, Hindalco down by 2.83%, JSW Steel down by 2.52% and Power Grid down by 2.16% were the top losers.

European markets were trading mostly in green; UK’s FTSE 100 increased 8.03 points or 0.11% to 7,180.51 and France’s CAC increased 6.89 points or 0.1% to 6,646.41, while Germany’s DAX decreased 20.64 points or 0.13% to 15,708.88.

Asian markets ended mostly lower on Wednesday tracking Wall Street’s overnight weakness as markets awaited fresh guidance from the US Federal Reserve's policy meeting later in the day. While, reports showed Americans slowed their spending in May and US producer prices rose at their fastest annual clip in nearly 11 years in the month. Chinese shares ended down following concerns about lofty valuations. Further, rising Sino-West tensions after G7 leaders took the Asian nation to task over a range of issues, which Beijing called a gross interference in the country’s internal affairs also dented Chinese market sentiments. Japanese shares closed lower despite hopes for a vaccine-driven domestic economic recovery. While, the overall value of core machine orders in Japan rose 0.6 percent sequentially in April, missing expectations for an increase of 2.7 percent.

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