Sensex ends down 369 pts

The Sensex ended (provisional) at 18,502 - down 369 points. Nifty ended at 5,572 - down 108 points.
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(Updated at 1432 hrs)

A steeper-than-expected hike in the key lending rates by the RBI took the markets lower in afternoon trades today.The Sensex erased all gains and dropped to a low of 18,538 on the announcement and has been trading at that level ever since. The index is now down 317 points at 18,555. The Nifty is down 98 points at 5,582.

Continuing its anti-inflationary stance, Reserve Bank of India (RBI) raised the repo rate by 50 basis points (bps) to 8% from 7.5%. Reverse repo has also been raised from 6.5% to 7% while the CRR has been left unchanged.

"There are signs that growth is beginning to moderate, particularly in interest sensitive sectors. But there is no signs of a broad-based slowdown", said RBI Governor D Subbarao. He added that a moderation in demand is necessary to bring down inflaiton and that the US debt standoff will add risks to the global capital flows.

FY12 GDP growth forecast was kept unchanged at 8%. The RBI stated that the FY12 fiscal deficit target is a challenge and that this move has been taken to control inflation which is imperative to sustain growth.

"This is an aggressive posture taken by RBI considering the inflation scenario. Very clearly shows that RBI is willing to sacrifice growth to tame inflation. Industry will suffer and hope that this will be the last of such  hikes,” Sudip Bandyopadhyay, MD & CEO, Destimoney Securities.

The rate hike took key interest rate sentive sectors down. BSE realty index shed 3% at 2,154.

Indiabulls Real Estate dropped 4% to Rs 111. DLF and Unitech  slipped 2-3% each. Other losers included Sobha Developers, HDIL and DB Realty.

Bankex and auto were down around 2% each.

ICICI Bank was the biggest dragger among Sensex stocks. The stocks, along with HDFC Bank, was responsible for a nearly 60 points slide in BSE benchmark. Among banking stocks, Kotak Mahindra Bank, Indus Ind Bank, Yes Bank and IDBI bank were also down. Bank of India slipped 3.5% to a new 52-week low of Rs 389 after posting a 28% decline in net profit for the first quarter ended June 30, 2011.

Auto stocks took a beating, ignoring Maruti Suzuki's strong performance in Q1. The country's largest autocar maker posted its net profit for the quarter ended June, 2011 at  Rs 549.23 crore, an increase of Rs 465.36 crore in the corresponding quarter a year ago. Total income increased to Rs 8,709.37 crore from Rs 8,409.62 crore in the same period. The stock was flat at Rs 1,184.

Meanwhile, weakness in Reliance post-results also played a part in the Sensex's downmove. RIL reported a 16.70% increase in its consolidated net profit at Rs 5,661 crore for the first quarter ended June 30, on the back of higher refining margins. Its net profit for the period April-June last year was Rs 4,851 crore, the company said in a filing.

Tea stocks were up pared early gains on news of India's tea imports dipping by almost 18% in April-May this year to 2.31 million kg. CCL Products gained 8% to Rs 230. Joonktolle Tea and Industries was flat at Rs 167 after gaining as much as 10% during the day. Tata Global Beverages was also flat.

BSE market breadth was fairly negative with 1,874 stocks declining as against 921 stocks on the advancing side. A total of 2,906 stocks were traded so far.