RBI’s caution on inflation spooks markets (Roundup)

MUMBAI - Indian equities markets, especially front-line stocks, were spooked after the Reserve Bank of India, having increased key lending rates by 25 basis points Tuesday, hinted at more rate hikes to rein in rising inflation.

Reserve Bank of India (RBI) Governor Duvvuri Subbarao hiked the repurchase or repo rate to 6.5 percent from 6.25 percent and reverse repo rate to 5.5 percent from 5.25 percent. Other rates like cash reserve ratio and statutory liquidity ratio remained unaltered.

The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened at 19,227.42 points, closed at 18,969.45 points — down 181.83 points or 0.95 percent from its previous close at 19,151.28 points.

The Sensex had climbed 189.71 points post-rate hike to 19,340.99 points.

The 50-scrip S&P CNX Nifty of the National Stock Exchange too followed a similar trajectory, ending 0.97 percent lower at 5,687.4 points.

Broader markets too edged lower, with the BSE midcap index closing 0.41 percent down and the BSE smallcap index ending 0.35 percent lower.

Banking stocks were among the top losers, followed by FMCG, realty and healthcare scrips. Consumer durables were among the top gainers.

The market breadth was negative, with 1,207 stocks advancing compared to 1,652 scrips on the decline, while 148 stocks remained unchanged.

Among gainers on the Sensex were NTPC, up 1.85 percent at Rs.195.90; Hero Honda, up 1.62 percent at Rs.1,778.50; Hindalco Industries, up 1.31 percent at Rs.235.10; and Tata Steel, up 0.96 percent at Rs.655.10.

Top Sensex losers included Hindustan Unilever, down 5.45 percent at Rs.281.65; ICICI Bank, down 4.21 percent at Rs.1,038.30; HDFC Bank, down 2.85 percent at Rs.2,087; and M&M, down 2.25 percent at Rs.770.50.

According to data available with market regulator SEBI, foreign institutional investors bought scrips worth $42.76 million Tuesday.

Other Asian stock markets ended mixed with concerns persisting that high inflation would lead to central banks in the region tightening rates further.

The Chinese Shanghai Composite index fell 0.68 percent to close at 2,677.43 points, while Hong Kong’s Hang Seng ended flat at 23,788.83 points,

However, the Japanese Nikkei closed 1.15 percent up at 10,464.42 points

Some gains were seen in following reports that economic data from the US would show a quickening in the economy’s growth. However, some weakness was seen after in stocks of car makers and in companies that missed earnings estimates.

Around mid-day, the German DAX was ruling 0.34 percent up at 7,091.93 points, while the French CAC 40 was trading dull at 4,036.83 points.

The UK’s FTSE was ruling 0.59 percent down at 5,908.89 points.