Markets weak, Sensex slips 85pts

Markets continued to trade in the narrow range with a negative bias in the noon deals. Analysts say markets are eyeing the Reserve Bank of India’s stand on interest rate going forward. Higher inflation - up at 9.06 per cent in in May versus 8.66 per cent in April - is expected to haunt growth drivers. Economist expect RBI to hike rates by 25 basis points on Thursday.

The central bank has raised rates nine times since March 2010 to cool inflation as food and fuel prices surged. Last month, Governor D Subbarao had said he was willing to risk a slowdown in growth to curb price pressures.

Goldman Sachs Group Inc. warned that inflation will remain a “key headwind” for India’s economy and ahead of the RBI policy meet. It expects the apex bank to continue with its ‘anti- inflationary stance in the remainder of 2011’.

The Sensex has weakened a bit more in early noon trades, and is now down 85 points at 18,223. The Nifty had shed 25 points at 5475.

According to Shashank Mehta, derrivative analyst with Nirmal Bang, "Any hike in rates above expectation will lead to accross the board sell off in rate sensitive sectors".

Among the Sensex  stocks Infosys, Hindalco, Sterlite Industries, SBI, Jindal Steel and NTPC were the top losers, down 1-1.5% each. On the other hand Reliance Infratructure, HDFC, Tata Steel, TCS, Hindustan Unilever and Tata Motors were the notable gainers on the Sensex.

All the sectoral indice barring FMCG and Healthcare indices were trading lower. BSE Realty index was the top sectoral loser, down 0.92% at 2132. BSE Consumer Durable, IT, PSU, Bankex and Metal indices were also trading lower by 0.5-0.8% each.

Among the realty stocks DB Realty was the top loser, down 2.2% to Rs 73. Peninsula Land, Unitech, Indiabulls Real Esate, DLF, HDIL and Sobha Developers were also trading in the red.

Meanwhile, the broader markets outperformed the benchmark indices but are trading on a flat note. The BSE Mid-cap index has advanced 9 points to 6968 and the Small-cap index has gained 19 points at 8363.

A2Z Maintenance and Engineering Company, Shoppers Stop, Godfrey Philips, Hathway Cables, SKS Microfinance, HMT and Marico were the top gainer among the mid-cap stocks. On the Small-cap charts TIL, Kewal Kiran, Mastek, Modern India, Bartronics, Zee News and Seshasayee Paper and Boards were the top gainers.