Sensex posts biggest weekly fall in a month on rate hike concerns

Sensex posts biggest weekly fall in a month on rate hike concerns

Bharat Heavy Electricals falls 3.84% to Rs.155.20, while ICICI Bank slips 4.06% toRs.1,086.05. Photo: Hindustan Times
Mumbai: The S&P BSE Sensex retreated over 200 points on Friday to mark its biggest weekly fall in nearly a month, as rate-sensitive stocks such as ICICI Bank Ltd fell on caution ahead of the Reserve Bank of India’s (RBI’s) policy review and the US Federal Reserve meet next week to decide the course of its monetary stimulus.
Weak economic data released on Thursday also dented investor sentiment.
The Sensex climbed to a record on 9 December after the Bharatiya Janata Party (BJP) won the state elections, giving it momentum to end the ruling Congress party’s decade-long rule in polls due by May and install Narendra Modi as Prime Minister. Modi is credited with achieving higher growth than the national average and increasing power capacity more than fivefold in his home state of Gujarat since becoming chief minister in 2001.
On Friday, The Sensex closed 1%, or 210.03 points, lower at 20,715.58 points, while the National Stock Exchange’s broader 50-share Nifty fell 1.10%, or 68.65 points, to 6,168.40 points.
The S&P BSE Bankex index fell 2.25% to be the biggest loser among sectoral indices.
The gainers included Coal India Ltd (CIL) that added 0.82% to Rs.283.85 andTata Motors Ltd that rose 2.73% to Rs.370.45.
Among the losers, Bharat Heavy Electricals Ltd (Bhel) fell 3.84% toRs.155.20, while ICICI Bank Ltd slipped 4.06% to Rs.1,086.05.
Data released after market hours on Thursday showed that the Index of Industrial Production (IIP) dropped 1.8% in October versus a 2% growth in September while consumer price inflation (CPI) accelerated to 11.24% in November from 10.09% in October.
Weak data has increased chances of the Reserve Bank of India (RBI) hiking its benchmark interest rate when it reviews its monitory policy on 18 December.
“The data is creating flutter in the market and its influence will be seen as to what the RBI governor will say next week,” Gaurang Shah, assistant vice-president at Geojit BNP Paribas Financial Services Ltd, said on Bloomberg TV India on Friday. “A 25 basis point rate increase is on the cards but anything more will see more downside.”
RBI governor Raghuram Rajan has raised the key interest rate twice after he moved to the central bank in September to fight rising prices. He may raise the repo rate to 8.5% next year from 7.75%, Goldman Sachs Group Inc. said on 21 November.
All eyes now are on the wholesale price index (WPI) to be released on Monday. A Bloomberg poll showed that the WPI will be 7% for November, same as October. However, a higher WPI numbers would almost make a rate hike certain.
Global investors bought a net $160 million of local shares on 11 December, taking this year’s inflows to $18.7 billion, the most in Asia after Japan, data from the market regulator show.
The Sensex has climbed 6.63% this year, the best performer among the four largest emerging markets, and trades at 13.5 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10.4 times.
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