BENGALURU, May 12 (Reuters) - Indian shares were weighed down by financials on Wednesday as Asian peers slumped on concerns over a potential pickup in U.S. inflation, while domestic COVID-19 deaths crossed the quarter-million mark with no signs of infections peaking.
Speculation that surging commodity prices and growing inflationary pressure in the United States could lead to earlier rate hikes and higher bond yields globally sent Asian shares to two-month lows, although U.S. Federal Reserve officials reiterated a firmly dovish policy stance.
In India, the central bank is seen maintaining status quo on interest rates as data expected later in the day is likely to show retail inflation eased to a three-month low in April. However, investors are concerned about potential outflows of foreign funds.
"Any potential hike in U.S. interest rates because of inflation would be an area of concern for India as foreign funds, which were supporting a rally in recent months, could move back to an extent," said Anita Gandhi, director at Arihant Capital Markets.
Adding to investor concerns, India reported a record surge in coronavirus deaths in the past 24 hours, pushing its overall death toll over a quarter million. read more
Moody's Investors Service warned on Tuesday that the second severe wave of coronavirus infections would slow near-term economic recovery, slashing its real GDP growth forecast to 9.3% from 13.7% for the fiscal year ending March 2022. read more
Investors are also awaiting April auto sales data from the Society of Indian Automobile Manufacturers.
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