Realty, banking shares under pressure as inflation accelerates

Unitech, Indiabulls Real Estate, HDIL, DLF, Canara Bank, BOI, BOB and Federal Bank are down 3-7% on NSE.

Shares of real estate and banking sectors are under pressure, falling by up to 6% on the bourses, after retail inflation as measured by the Consumer Price Index (CPI) accelerated to 7.96% in July from 7.46% in June. Therefore, Reserve Bank of India (RBI) is likely to maintain a cautious stance in the next policy too.

Unitech, Indiabulls Real Estate, Housing Development and Infrastructure (HDIL) and DLF from real estate sector are down 3-7% on the National Stock Exchange (NSE). Canara Bank, Federal Bank, Bank of Baroda and Bank of India from the banking space down 3% each.

The NSE CNX Realty index, the largest loser among sectoral pack, down 2.7%, while banking index Bank Nifty declined 0.72% compared to 0.02% rise in benchmark CNX Nifty at 1115 hours.

Retail inflation is now back at the RBI’s target of 8% for January 2015. While the upside risks to vegetable and fruit prices persist, the strong base effect and proactive measures taken by the government to control food inflation should cap any sharp increases in inflation at least until December, according to CRISIL Research.

Anis Chakravarty, Senior Director, Deloitte in India said, the impact is largely seasonal with CPI inflation (which has a larger weightage towards food and retail) being affected by the advent of monsoon. Since then, rainfall has picked up and prices of vegetables and other perishable commodities have largely started to subside.