Realty, bank, auto stocks dip amid dim rate cut hopes

Mumbai: Interest-rate sensitive realty, bank and auto stocks suffered substantial losses on Thursday, plunging by up to 6.4 percent, as inflation, which rose to 7.5 percent in May, dampened hopes of a rate cut by the RBI next week.

With WPI inflation rising to 7.5 percent in May and food inflation going up to 10.74 percent from 10.49 percent in the previous month dashing hopes of a rate cut by RBI, hectic selling emerged in interest-rate sensitive counters pulling Sensex down to 16,658.98.

From the realty space, Indiabulls Real Estate was the biggest dampener as it shed 6.41 percent, while Unitech declined by 5.70 percent. Oberoi Realty slipped by 4.45 percent and DLF was down by 2.20 percent.

Led by losses in these stocks, the BSE realty index settled at 2.91 percent lower at 1,594.44.

Market experts said upward revision in May inflation numbers led to weak sentiment, raising doubts on the quantum of rate cut by the RBI, resulting in pressure on rate sensitive sectors.

Among financial scrips, PNB was down 5.49 percent, Canara Bank lost 4.40 percent, SBI declined by 3.06 percent and ICICI Bank shed 3.50 percent.

Following the downtrend in these stocks, the BSE bankex index ended at 11,338.72, down 2.82 percent.

"Bank stocks slide on waning hopes of rate cut," Sharmila Joshi Head Equity Fairwealth Securities said.

From auto stocks, Tata Motors skidded 4.56 percent, Maruti Suzuki shed 2.58 percent and Bajaj Auto was down 0.76 percent. The BSE auto index was down 1.99 percent at 8,983.29.

"Interest rate sensitive bank and realty stocks were the worst performers today. More than expected high inflation rate caused jitters in the market as to the reaction of the Reserve Bank of India (RBI) in the forthcoming policy meeting on June 18," Shanu Goel Research Analyst Bonanza Portfolio said.

Inflation moved up to 7.55 percent in May making it tougher for the Reserve Bank to cut interest rates in its policy next week to boost sagging growth.

PTI