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Shares fall for 2nd day on Fed rate increase concerns

MUMBAI (NewsRise) - Indian shares fell to a two-week low Thursday, as global risk sentiment soured after the U.S. Federal Reserve's April meeting minutes further bolstered the likelihood of a rate increase as early as June.

The benchmark BSE Sensex fell 1.2% to 25,399.72 points, its lowest since May 6. The index is down 1% in May and 2.8% in 2016. The broader NSE Nifty50 index declined 1.1% to 7,783.40 points.

Index heavyweights ITC and Housing Development Finance, State Bank of India, Adani Ports & Special Economic Zone and Oil & Natural Gaswere the biggest losers on the Sensex Thursday, while Lupin, Tata Motors and information technology stocks advanced.

The U.S. central bank released its April meeting minutes Wednesday, which showed most policymakers considered a June rate increase appropriate "if incoming data were consistent with economic growth picking up in the second quarter, labour market conditions continued to strengthen" and inflation was in line with the Fed's long term objectives.

Regional markets fell for a second day. Indexes had come under pressure on Wednesday as faster-than-expected U.S. inflation, upbeat housing and industrial production data, and hawkish comments from Federal Reserve officials fuelled expectations that monetary tightening in the world's largest economy was imminent.

The Fed raised rates for the first time in a decade in December, but has stood pat since then amid global financial market volatility and worries about U.S. economic growth. The central bank meets on June 14 and June 15 to review policy.

Europe stocks declined 1% Thursday and U.S. stock futures pointed to a lower opening on Wall Street.

In Asian markets, Hong Kong's Hang Seng and South Korea's KOSPI slipped 0.7% and 0.5%. China's Shanghai Composite and Japan's Nikkei 225 ended little changed.

Regional currencies also declined Thursday, with the Indian rupee falling to its lowest level in two months.

"Volatility is likely to mount in light of the increased possibility of a rate hike by the Fed and ahead of derivatives expiry next week," said Rakesh Kadakia, Promoter at Vishesh Capital. "The macro global environment is not conducive for risk assets and moves in Indian markets will be dictated by global risk sentiment."

On the Sensex, 24 of the 30 constituents ended lower, while overall declining issues outnumbered advancing ones 1,628 to 919 and 169closed unchanged.

ITC fell 2.4% to 325 rupees. Dealers said the cigarette maker's shares slipped on position paring ahead of its March quarter earnings announcement on Friday. The stock had advanced in the last five sessions and closed near its highest levels in 2016 on Wednesday.

HDFC declined 2.8% to 1,175 rupees. The mortgage provider's shares staged a rally in the May on the back of its March quarter earnings, but traders said the company was facing technical resistance above the 1,200 rupee-level.

The nation's largest lender State Bank of India declined 4% to 172.90 rupees. State-owned banks were under renewed selling pressure after Punjab National Bank yesterday reported the largest loss in banking history for the January-March quarter on increased bad debts and higher provisioning. PNB declined 2.8% to 74.05 rupees Thursday.

Ten Indian state-owned banks have so far reported combined losses of 153 billion rupees ($2.3 billion), according to Bloomberg.

The Nifty PSU index fell 3.8%, with all index constituents closing in the red.

Amongst the private lenders, Axis Bank and ICICI Bank slipped 2.1% to 491 rupees and 0.5% to 225.10 rupees.

Adani Ports slipped 6.1% to 171.85 rupees, its lowest level in two years. The port operator has fallen over 25% since its disappointing March quarter earnings.

India's largest oil and gas explorer ONGC fell for the first time in three days, declining 2.1% to 209.80 rupees. Crude prices fell 2% Thursday, hurt by the strength in the U.S. dollar.

Lupin advanced 1.4% to 1,655 rupees. The drugmaker March quarter earnings beat street estimates with net profit surging 48% year-on-year, driven by strong drug sales in international markets.

Tata Motors rose 0.7% to 387.70 rupees. The automaker late yesterday informed the exchanges that Life Insurance Corporation of India, the nation's largest insurer, has raised its stake in the company from 4.91% to 7.01%.

Software services exporters were boosted by the rupee's decline, with Wipro and Tata Consultancy Services rising 0.7% to 542.70 rupees and 0.2% to 2,555 rupees. Infosys fell marginally, slipping 0.3% to 1205.35 rupees.

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