Indian shares fell for a second straight session on Wednesday with financials leading the decline, as fears of faster interest rate hikes in the United States hurt investor risk appetite. The broader NSE index closed below 10,500 for the seventh time in nine sessions, ending 0.58 percent lower at 10,492.85. The benchmark BSE index closed down 0.47 percent at 34,184.04.
Investors now await October-December gross domestic product data due later in the day for clues about the domestic economy. Asian shares took a hit after Powell said each member would write a new "dot plot" rate path ahead of the March meeting and that he wouldn't want to prejudge the outcome, indicating the possibility of a rate hike in March. MSCI's broadest index of Asia-Pacific shares outside Japan slipped 1.06 percent.
The weak spell in domestic markets lingered on apprehensions over state-run banks after the finance ministry set a 15-day deadline for banks to take pre-emptive action on operational and technical risks, following a $2 billon fraud at Punjab National Bank. The ministry's Department of Financial Services also ordered state-run lenders to comb through their bad loans of more than 500 million rupees ($7.68 million) for potential fraud.
"In the short-term, these finance ministry directives could create panic in the market," said Sumit Pokharna, deputy vice president, Kotak Securities.
Investors are also looking out for key domestic economic data this week including October-December gross domestic product (GDP) due later in the day. A Reuters poll forecast GDP expansion at 6.9 percent, the fastest in 2017. The Nifty PSU Bank index fell as much as 2.7 percent before recovering somewhat, dragged by PNB and Bank of India which fell as much as 6.46 percent and 5.4 percent, respectively.