Shares subdued on rate rise concerns

Shares subdued on rate rise concerns

New Delhi: Shares erased an early rise and dropped 0.4% on Thursday, a day before the Reserve Bank of India (RBI) is widely expected to increase rates for the 12th time in 18 months to help stem high inflation.

Lenders such as ICICI Bank fell 1.4% and Axis Bank shed 1.1% on worries rising rates could slow down demand for loans.

Annual inflation climbed to its highest in more than a year, data showed on Wednesday, as prices of food and manufactured goods surged, reinforcing the case for a tighter policy despite weakening growth and a worsening global outlook.

By 11:25 am, the main 30-share BSE index was down 0.36% at 16,649.83 points, with 16 of its components in the red.

It had opened up 0.8%, taking cues from Asian markets that rose on renewed efforts by European leaders to address the euro zone debt crisis.

The 50-share NSE index was trading down 0.31% at 4,997.10 points. In the broader market, there were 1.2 gainers for every loser on volume of about 218 million shares.

“It has more to do with the credit policy tomorrow," said Neeraj Dewan, a director at Quantum Securities in New Delhi. “People are worried ... everyone is talking about interest rate hike."

The subdued mood also hit export-driven software services companies that had initially climbed after the rupee dropped for a ninth consecutive session.

Bellwether Infosys fell 0.7%, while top player Tata Consultancy Services lost 0.4%.

Energy major Reliance Industries, which has the biggest weighting on the benchmark index, shed 1.2% to Rs815.50.

In comparison, the MSCI’s measure of Asian markets other than Japan was up 0.72% and Japan’s Nikkei gained 1.7%.

Stocks on the move

• Marico fell more than 6% after the consumer products maker warned its post-tax profit in upcoming quarters may fall short of market expectations due to rising costs and continued uncertainty in the global markets.

• Kingfisher Airlines Ltd fell more than 5% after its auditor said in the company’s annual report the carrier needs to inject funds to continue operations.