Sensex, Nifty drop to over 1-month lows ahead of Fed policy meet

Indian stocks fell to over one-month lows today with benchmark Sensex losing 65.59 points to end at 28,437.71 and Nifty index shedding 14.60 points to close at 8,633.15 as markets turned volatile ahead of a closely watched US Fed policy meet that may indicate timing of rate hike.

The 30-share Sensex after hitting a session high of 28,581.82 in early trade, subsequently succumbed to selling in bluechips and slipped into red as it hit a low of 28,384.09.

After cutting some losses, the Sensex settled at over one-month low of 28,437.71, down 65.59 points, or 0.23 per cent. An earlier than expected US interest rate hike is feared to trigger capital outflows from emerging markets like India.

The US dollar hit a 12-year high against the euro today, ahead of Federal Reserve policy meeting this week, while oil prices fell again as US supplies continued to build.

Global investors are keeping their focus on the Fed's policy meeting on Wednesday, seeking a timeline for when it will raise interest rates as the US economy strengthens.

The Sensex had lost 427.11 points on Friday after rise in retail inflation dimmed hopes of aggressive rate cuts by RBI.

Also, the NSE index Nifty ended 14.60 points, or 0.17 per cent, down at over one-month low of 8,633.15 after touching a high of 8,663.55 and a low of 8,612 intra-day.

Selling pressure was visible across-the-board despite successful coal and spectrum auctions and passage of Insurance Bill in Parliament, brokers said.

"After the budget, the most anticipated macro event which is watched by markets worldwide is the FOMC meet that is scheduled in coming weeks where markets fear rate hikes by Fed backed by reviving growth and better than expected jobs data," said Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio.

Globally, Asian markets ended mixed as investors await developments from Bank of Japan and US Fed meetings this week. European markets edged up in opening trades.

After judging the outcome of recent IIP and CPI numbers, it almost became evident that RBI would not be cutting rates in the upcoming policy meet but the outcome of WPI has once again raised hopes of a rate cut, he added.

During the day, government data showed Wholesale Price Index (WPI) inflation for February dipped (-) 2.06 per cent. This is the fourth month in a row that WPI-based inflation remained in the negative zone.