Bangalore: Shares ended 2.4% lower on Friday, notching up a loss for the first week of the year, on deepening concerns the central bank might raise interest rates soon to rein in galloping inflation.
Interest rate sensitive sectors such as autos and real estate fell sharply while metals too plummeted tracking a fall in global base metal prices.
The main BSE sensex, which climbed over 17% in 2010 propped by record foreign fund inflows of $29.3 billion, on Friday shed 4% for the week, snapping a three-week rise.
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“The market is down because there is a fear interest rates will be raised soon,” said Neeraj Dewan, director of Quantum Securities. “There is not too much of a downside from here, the market is very close to finding a support.”
Worries about aggressive rate increases by the central bank heightened after the food price index rose 18.32% in the 12 months to Dec. 25, its highest in more than a year.
The Reserve Bank of India is scheduled to review policy on 25 January, and a Reuters poll on Wednesday forecast at least a 25 basis point increase in key rates.
The 30-share BSE index fell 2.4% on Friday, or 492.9 points, to 19,691.81 points, with all its components in the red.
The auto index was down 3.3% with Tata Motors shedding 5.5% and Mahindra & Mahindra off 4.1%.
The realty index shed 1.8% with the country’s top listed realtor DLF losing 3.1%.
Metal counters lost their sheen tracking lower global prices with Hindalco slipping 7% and Tata Steel, the world’s seventh-largest steel maker, losing 3.4%. The sector index ended over 4% down.
Export-led outsourcers Tata Consultancy Services and Infosys Technologies fell 2.8% and 3.2% respectively after hitting record highs earlier on hopes of a strong growth outlook in 2011.
Infosys kicks off the results season with its quarterly numbers on 13 January.
“People are waiting to see the results before more action,” said Vaibhav Sanghavi, director of Ambit Capital, referring to quarterly earnings that begin rolling out from next week.
“Meanwhile, inflation has been bothering and we can see banks under pressure.”
The banking sector, which led the losses early in the session, saw some buying towards the latter half of the session and ended 1.4% down.
State Bank of India, the country’s top lender, was down almost 1%, while HDFC Bank dropped 2.5%. Mortgage lender Housing Development Finance Corp shed 3.2%. The country’s biggest private-sector lender ICICI Bank closed 0.5% lower.
Reliance Communications, which rose as much as 2.8% after BNP Paribas raised its rating on the No. 2 Indian mobile phone operator to ‘buy´ from ‘reduce,´ ended 0.6% lower.
In the broader market, losers outnumbered gainers in the ratio of 3.9:1 on volume of about 332 million shares.
The 50-share NSE index was down 2.4% at 5,904.60 points.
World stocks as measured by MSCI were down 0.3% by 1026 GMT, while the Emerging markets stocks edged 0.7% lower.
Nagarjuna Fertilizers and Chemicals ended 0.8% lower after rising 5% on news its board would meet on 10 January to consider restructuring and amalgamation of IKisan Ltd, Kakinada Fertilizers Ltd, Nagarjuna Fertilizers and Nagarjuna Oil Refinery Ltd.