Yellen's comments likely to weigh on markets

Fed Chair said the country is ready for higher interest rates if upcoming economic data justify them

Markets may drift lower in trade today tracking Asian peers, after the US Federal Reserve Chair Janet Yellen said that the December lift-off could be a possibility.

In her first public comments since the Fed's meeting last week, Yellen said the country is ready for higher interest rates if upcoming economic data justify them.

"If the incoming information supports that expectation then our statement indicates that December would be a live possibility," she said.

US economic data on Wednesday supported Yellen's guarded optimism, with private employers maintaining a steady pace of hiring in October and with a jump in new orders buoying activity in the services sector.

Stocks on Wall Street though slipped on Wednesday, with S&P 500 Index falling 0.4% from a three-month high touched on Tuesday, driven by losses in the energy sector after a fall in oil prices.

On Thursday, MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.5%, led by 1.2% fall in Australian shares. Japan's Nikkei, however, bucked the trend and rose 0.6%, as growing expectations of a December rate hike by the Fed boosted the dollar against the yen.

Back home on Wednesday, the S&P BSE Sensex closed 37 points lower at 26,553 and the Nifty lost 21 points to end at 8,040. In the broader market, BSE Midcap index outperformed the largecaps and ended 0.2% higher whereas BSE Smallcap index lost 0.3%. Market breadth ended negative with 1,269 gainers and 1,462 losers on the BSE.

"Pressurised by weak domestic cues, markets failed to uphold early gains on Wednesday and slipped in red by the end. To start with, firmness at global front led positive start at the domestic front, which further supported by strength in currency against the US dollar. But, those gains gradually fizzled out due to lack of conviction among the participants citing subdued earning season and expected rise in volatility ahead of Bihar election results," said Jayant Manglik, President, Retail Distribution, Religare Securities in a note.

"In last two sessions, we have seen market opening on positive note but finally ends in negative territory and this clearly shows lack of strength at higher levels. We reiterate our negative view on index with next target of 7900 in Nifty index. Traders are advised to maintain extra caution in Midcap and Smallcap counters as selling could be steeper in the next leg of correction," he adds.



With Reuters inputs