Bonds, stocks fall on industrial production data, rising inflation

Bonds, stocks fall on industrial production data, rising inflation
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First Published: Sat, Jul 12 2008. 12 14 AM IST

Gloomy outlook: People outside the Bombay Stock Exchange building. (Photo: Arko Datta/Mint)
Gloomy outlook: People outside the Bombay Stock Exchange building. (Photo: Arko Datta/Mint)
Updated: Sat, Jul 12 2008. 12 14 AM IST
Mumbai: The Bombay Stock Exchange’s bellwether 30-share Sensex index lost 3.3%, or 456.39 points, as investor sentiment turned weak. The broader 50-stock S&P CNX Nifty index on the National Stock Exchange fell 2.72%, or 113.2 points.
The yield on India’s 10-year bonds shot up to 9.5442%, a seven-year high, after the inflation numbers climbed to 11.89% for the week to 28 June.
Gloomy outlook: People outside the Bombay Stock Exchange building. (Photo: Arko Datta/Mint)
This is the highest since the current series of inflation numbers became available in April 1995.
“The trade-off between rising inflation and falling growth is worsening,” said Sonal Varma, India economist of US investment bank Lehman Brothers Holdings Inc.
The Index of Industrial Production figures and the new inflation level point to a greater slowdown in economic growth this year, and stock prices could further slide, said the head of institutional sales at a local brokerage, who did not wish to be identified.
According to Sudip Bandyoypahdyay, chief executive of retail brokerage Reliance Money Ltd, there is more pain remaining in equity markets. “Even decent results from Infosys could not save the day for markets,” he said.
However, inter-bank call money rates remained above 9% for the fifth straight day, implying a tight liquidity in the system as the first half of commercial banks’ cash reserve ratio, or CRR, hike by the central bank took effect on 5 July and sucked out more than Rs9,000 crore from the system.
The next increase in CRR will take effect from 19 July. The central bank had to infuse Rs45,295 crore on Friday—the highest in nearly three weeks—in the system to help banks tide over the tight liquidity situation.
nesil.s@livemint.com
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First Published: Sat, Jul 12 2008. 12 14 AM IST