Sensex falls 203 points as higher inflation trims rate cut hopes
Mumbai: Markets slumped on Thursday with Sensex shedding 203 points after interest rate sensitive banks, realty and capital goods stocks came under intense selling after a rise in inflation dashed hopes of a much-anticipated rate cut by RBI next week.
The 30-share index opened weak and traded in the negative zone throughout ended the day at 16,677.88 points, down 203 points or 1.20 percent. Across the Indian market, over 1,700 stocks tanked with investor wealth dropping by Rs 60,000 crore Thursday.
Brokers said sentiment was hit by a rise May inflation dampening widely expected 25 bps rate cut RBI. The strong hopes were built up a series of dismal economic date showing slowing economy. The anticipation of rate cut had received shot in the arm after GDP registered a nine-year low of 6.5 percent in 2011-12.
However, the hopes were dashed as May inflation rose 7.5 percent, while food inflation remained high at 10.74 percent, its third straight month in double-digit zone.
Brokers said an upward revision in March inflation numbers to 7.69 percent from 6.89 percent further hit the mood.
"The key issue before RBI is whether to support flagging growth momentum or tackle inflationary pressures," said Sonal Varma, economist, Nomura India.
European and Asian indices traded lower in 1-2 percent rage after Moody's cut its rating on Spanish government debt by three notches to 'Baa3' - one level above junk - from 'A3'.
Among the 30-share index, Tata Motors was the worst hit losing 4.56 percent, followed by capital goods major L&T (3.92 percent) and power producer NTPERCENT (3.76 percent) as 25 constituents ended lower.
Bank counters including ICICI Bank, SBI and HDFC Bank lost 1.5-3.5 percent. Auto majors Tata Motors, Maruti, Bajaj Auto, M&M and Hero MotoCorp also ended on the losing side.
Similarly, the 50-share National Stock Exchange index Nifty fell by 66.70 points, or 1.30 percent to 5,054.75.
The rupee was last trading at 55.81 against the US dollar, down 13 paise over Wednesday's close of 55.68.
Most Asian shares fell today with Italy due to auction more debt later in the day, Spain under the threat of more downgrades, and key elections in Greece in the weekend.
Key benchmark indices in China, Hong Kong, Japan, Taiwan and Singapore fell by up to to 1.15 percent while South Korea's Kospi rose by 0.65 percent.
European stock markets also retreated in early trade. Key benchmark indices in the UK, France and Germany were down in the 0.85-0.98 percent range.
Out of the 30-share Sensex pack, 25 scrips ended lower, four coounters inched up while TCS ruled steady.
Major losers were Tata Motors (4.56 percent), L&T (3.92 percent), NTPERCENT (3.76 percent), ICICI Bank (3.5 percent), SBI (3.06 percent), Maruti Suzuki (2.58 percent), Tata Power (2.33 percent), Hindalco (1.80 percent) and Jindal Steel (1.67 percent). HDFC (1.63 percent), Sun Pharma (1.56 percent), BHEL (1.54 percent), HDFC Bank (1.53 percent), Tata Steel (1.17 percent), HUL (1.15 percent), Dr Reddy's (1.04 percent) and Gail India (1.01 percent) also ended lower. However, Infosys rose by 1.09 percent.
Among the sectoral indices, the BSE-Realty dropped by 2.91 percent, followed by BSE-Bankex (2.82 percent), the BSE-Capital Goods (2.79 percent), the BSE-Power (2.16 percent), the BSE-Auto (1.99 percent), the BSE-PSU (1.10 percent), the BSE-Consumer Durable (1.09 percent) and the BSE-Metal (1.02 percent).
The total turnover dropped to Rs 1,772.86 crore from Rs 2,117.79 crore yesterday.
"Support for Nifty stands at 5005 levels while resistance now comes at 5145 levels. Investors would keep an eye Consumer Price Index, Food and Energy Index, CPI core Idnex, Initial Jobless Claim to be released by the commerce Department today evening in the US," said Sharmila Joshi, Head Equity, Fairwealth Securities.
Foreign institutional investors bought shares worth a net Rs 217.68 crore yesterday as per provisional figures from the stock exchanges.