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India shares fall as Fed outlook damps risk-asset demand

Banks, software exporters biggest losers

MUMBAI (NewsRise) -- Indian shares fell Thursday after the U.S. Federal Reserve raised its forecast for interest rates, casting a shadow on the outlook for risk assets.

The BSE Sensex declined 0.4% to 35,599.82 and the Nifty 50 dropped 0.5% to 10,808.05. Financial and technology companies were the biggest contributors to the losses. State Bank of India fell 1.7% and Axis Bank dipped 1.5%, pacing losses among lenders. India's largest software company Tata Consultancy Services fell 1.8% while the second-biggest Infosys dropped 0.6% to 1,238.70 rupees. Shares of Infosys went ex-dividend to the tune of 30.50 rupees on Thursday.

The losses came alongside a decline in most regional equity indexes after the Fed's dot plot showed a median expectation for a total four rate hikes this year, up from three in March. The 2018 core inflation projection and economic growth forecast were upgraded by 10 basis points, reinforcing the Fed's hawkish bias.

Goldman Sachs said in a note that changes to the post-meeting statement were hawkish -- pointing to upgrade growth and household spending, acknowledgement of lower unemployment, deletion of the pledge to keep rates low "for some time," and no mention of international risks.

Regional risk appetite was further damped by soft China economic data. Earlier Thursday, Asia's largest economy reported that industrial output rose by 6.8% in May and retail sales increased by 8.5%, both short of expectations of economists polled by Reuters. The pace of growth in retail sales last month was the slowest in one-and-a-half decades, Reuters calculations showed.

The Shanghai Composite index closed 0.2% lower and Hong Kong's benchmark index dropped 0.9%. The Nikkei Asia300 Index of companies outside Japan dropped 1.1%.

Among other movers on the BSE, Tata Motors dropped 0.8% to 305.75 rupees. Deutsche Bank cut the target price on the stock to 380 rupees after lowering financial year earnings-per-share forecasts for 2019 and 2020 by approximately 30% to account for new capitalization policy and weaker growth.

HDFC Bank advanced 0.1% to 2,037.15 rupees after India's federal cabinet approved the lender's proposal to raise 240 billion rupees in foreign direct investment. Citibank maintained its 'buy' rating and 2,425 rupees target price on the stock, saying that the capital raising is a positive trigger for the shares.

ICICI Bank closed 2.1% lower. The lender has approved the sale of up to 2% of its stake in life insurance arm ICICI Prudential Life Insurance to comply with regulatory requirements. Shares of ICICI Prudential Life closed 1.7% lower.

Cipla advanced 1.1% to 587.95 rupees after the U.S. heath regulator approved its application for a generic injection used in the treatment heart blockages.

Kotak Securities raised the target price on the stock to 650, saying that the approval further vindicates Cipla's development and manufacturing capabilities.

Lupin rose 3.4% after saying it received approval for a generic version of Bayer Healthcare's Beyaz oral contraceptive tablets. Alembic Pharma surged 3.3% after winning approval for a drug used in the treatment of bacterial infections.

--Nimesh Vora

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