Rate hike fear spooks market; key indices down 1%

Markets closed in the red for fourth consecutive day with the benchmark indices losing over 1% each on fears of rate hike by the central bank next week after consumer price inflation in November remained in double digits.

At close, the Sensex was down 210 points at 20,716 and the Nifty closed below 6,200, down 69 points at 6,168.

After showing some resilience in early trades, the broader markets too tumbled in closing hours. The midcap index was down 1.3% and the smallcap index gave of 1% in line with the BSE benchmark index.

The Index of Industrial Production (IIP), industrial growth in October 2013 reported contraction of 1.8% as compared to growth of 2.0% in the previous month and 8.4% in October 2012. The industrial production for October 2013 surprised negatively by coming in lower than market expectations of a 1.2% decline.

The retail price index-based inflation jumped to an all-time high of 11.24% in November, driven by high vegetable prices, official data showed today. The inflation stood at 10.09% in October, entering double digits for the first time in six months.

Rupee

The rupee was weak due to dollar buying by foreign banks and state-run banks. According to currency dealers weakness in the rupee is attributed to negative sentiments in the equity market after the release of the Consumer Price Index (CPI) inflation data yesterday. Dollar demand from oil companies and importers is also putting pressure on the rupee.

At 1600 hrs, the rupee was trading at Rs 62.17 compared with previous close of Rs 61.83 per dollar. Currency dealers see the Reserve Bank of India intervening in the currency market later during the day to arrest the volatility.

Global Markets

Asian markets were mixed as investors remained cautious ahead of the US Fed's stance at its two-day meet next week. Shares in Japan firmed up after the yen weakened against the dollar. The benchmark Nikkei ended up 0.4% while Shanghai Composite was down 0.3%. Hang Seng and Straits Times were trading flat with marginal gains.

In Europe, DAX was up 0.2% each while CAC and FTSE were flat.

Sectors & Stocks

Among sectoral indices, BSE Bankex, Realty, Power and Capital Goods indices were the top losers down  2% each followed by Consumer Durables, Oil and Gas and Metal indices down 0.6-1%.

Bank shares were down on fears that the RBI might hike rates next week on the back of high consumer price inflation in November. ICICI Bank, HDFC Bank, SBI were down 0.7-4% each.

Capital goods shares lost ground after weaker-than-expected industrial production in October. L&T was down 1.5% and BHEL slipped 4% and was the top loser among Sensex-30.

Auto stocks were also among the top Sensex losers on concerns that high interest rate on vehicle loans could result in slowdown in sales growth going forward. Bajaj Auto, Hero MotoCorp, Maruti Suzuki was down 1.5-3% each.

Other Sensex losers include, Reliance Industries was down 0.8% and TCS dipped 1.2%.

Tata Motors was up nearly 3% at Rs 370 on value buying was the top Sensex gainer for the day. This is after falling nearly 8% in past two trading sessions, as the company said luxury unit Jaguar Land Rover (JLR) would increase its capital spending for the financial year 2015.

Wipro, Tata Steel, Coal India, Mahindra & Mahindra and Infosys up 0.3-1.6% were the only stocks among Sensex-30 to end in the green.

In individual names, Jet Airways (India) tanked 7% to Rs 272, recovering marginally from its lowest level since March 2012, on back of heavy volumes.

Torrent Pharmaceuticals dipped 4% to Rs 479, after the company said it entered into a definitive agreement to acquire the branded domestic formulation business of Elder Pharmaceuticals for a consideration of Rs 2,004 crore on slump sale basis.

Wockhardt dipped 5% to Rs 356, its lowest level since August after the US Food and Drug Administration (FDA) has imposed an import alert on its manufacturing unit at Chikalthana, Aurangabad, in Maharashtra.

Market breadth remained weak with 1,573 losers and 885 gainers on the BSE.