Sensex, Nifty slip as RBI policy panel minutes suggest hawkish tone

By Vishal Sridhar

(Reuters) - Indian shares slipped on Friday as minutes of the central bank's policy panel meeting stoked expectations of an interest rate hike, with losses in financials and metals overshadowing gains in information technology stocks.

The rupee dropped to its lowest in more than a year following a hawkish tone in the minutes, released on Thursday, of the Reserve Bank of India's monetary policy committee (MPC) meeting that took place earlier this month.

"Release of the minutes revive the risk of an earlier-than-expected rate hike," Morgan Stanley said in a note.

Asian markets fell, with MSCI's broadest index of Asia-Pacific shares outside Japan down 0.8 percent.

The broader Nifty was down 0.29 percent at10,534.30 as of 0615 GMT, while the benchmark Sensex was 0.22 percent lower at 34,351.92. However, both indexes were on track to post gains for a fourth consecutive week.

"Markets will remain volatile this year as they are making new highs and factors such as upcoming elections, crude prices and dollar will only add to the volatility," Sudhakar Pattabiraman, head of research operations at William O'Neil's MarketSmith.

Oil dipped on Friday but stayed near three-year highs reached earlier this week, with ongoing OPEC-led supply cuts and strong demand gradually drawing down excess supplies.

The underlying sentiment in India is, however, positive and the earnings season will set the future trajectory for the markets, Pattabiraman said.

India's ruling alliance is facing elections in several states spread over 2018 and a general election that must be held by May next year.

Metal stocks lost shine with the NSE metal index shedding over 2 percent following a five-session winning run, while the NSE PSU Bank index was on track to lose for a seventh session in eight.

However, IT stocks shrugged off the weakness in broader market with the NSE IT index trading 4 percent higher, on track to post gains for a third straight week.

Investors cheered the results of Tata Consultancy Services Ltd, sending its shares to an all-time high after the country's top software services exporter posted its biggest-ever profit on Thursday.

Mahindra CIE Automotive Ltd surged nearly 8 percent after its March-quarter profit more than doubled, while shares of industrial services provider Cyient Ltd hit record on strong results.

(Reporting by Vishal Sridhar in Bengaluru; Editing by Amrutha Gayathri)