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India shares fall as rising U.S. yields damp emerging market assets

State Bank, ICICI Bank pace decline in index

(NewsRise) -- Indian shares fell Wednesday, along with most regional markets, as rising U.S. yields hurt demand for emerging market assets.

The BSE Sensex declined 0.3% to 34,501.27 and the Nifty50 Index dropped 0.4% to 10,570.55. Lenders were the biggest contributors to the losses, with ICICI Bank and State Bank of India falling 1.9% each. Hindalco Industries and National Aluminium declined by 1.8% or more as aluminum prices continued to fall after the U.S. softened sanctions on Russian producer United Company Rusal.

Indian equities climbed down from near three-month highs as U.S. long-term bond yields headed higher for the sixth straight session. The 10-year Treasury yield crossed 3% for the first time in more than four years, triggering a more-than-400-points selloff on the Dow Jones Industrial Average. Futures on the benchmark index pointed to more losses when the U.S. markets open Wednesday. The Nikkei Asia300 Index of companies outside Japan dropped 1%.

"The momentum for Indian markets remains intact despite today's losses. But the risk is that rising U.S. yields lead to major correction in markets worldwide as investors adjust asset allocations," said Akash Jain, vice president of research at Mumbai-based Ajcon Global. "If that happens, Indian markets too will be affected. The other concerns are persistent selling by foreign investors and a weaker rupee."

Overseas investors have withdrawn almost $700 million from Indian markets this month, and according to Jain, the outflows could accelerate in the coming months if U.S. yields continue to rise.

The Indian rupee, weighed by rising U.S. yields, dropped to fresh one-year highs on Wednesday, boosting software exporters. Tata Consultancy Services added 2.4%, Tech Mahindra rose 0.4%, and HCL Technologies climbed 0.5%.

Zensar Technologies jumped 4.2% after reporting a 14.2% increase in net profit for the March quarter. The company also approved a stock split.

Bharti Airtel advanced 3.4% after India's biggest mobile phone operator posted a surprise profit in the January-March quarter. Analysts had expected the company to report a loss. Meanwhile, the company approved the merger of its unit Bharti Infratel and Indus Towers to create a listed pan-India telecom tower operator.

Shares of Bharti Infratel, in which Airtel is a majority owner, dropped 1.1%.

GIC Housing rose 3.9% following a 28% rise in net profit for the March quarter. ICICI Prudential Life Insurance added 5.5% after a lesser-than-expected 16% decline in net profit for the same period.

Bajaj Corp. dropped 5.5% after earnings of the hair oil company missed expectations of analysts polled by Bloomberg. Chemical company DCM Shriram tumbled 16% after its net income in the March quarter plunged 68%.

--Nimesh Vora

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