Markets succumbed to selling pressure in the last leg of the trade due to weakness in heavyweights Reliance Industries, Larsen &Tourbo and Infosys. The Sensex closed down 137 points, at 17,994 and the Nifty declined 50 points, at 5,396 (provisional).
---------------------- Updated 14:30 hours
Markets are expected to close in the red after Reserve Bank of India raised rates by 25 bps, putting pressure on margins of India Inc as loans would become more expensive.
The Nifty made a gap down opening following jitters across the globe but the index recovered intra-day and touched at high of 5,447 as the rate hike was along the expected lines. However, selling pressure seeped in as investors digested the likely impact of the rate hike, taking the index low to 5,404. The Nifty was hovering around 5420, down 26 points and thebenchmark Sensex was trading at 18,067, down 67 points at 14:30 hours.
The central bank hiked the key rates for the tenth time since March 2010 to tackle the spiraling inflation. The key rates were hiked by 25 basis points. The repo rate was raised to 7.5% and the reverse repo rate now stands at 6.5%, while the cash reserve ratio remains unchanged. The Reserve Bank of India, said the policy stance remains anti-inflationary and the inflation persists at uncomfortable levels.
Analysts said that RBI will raise rates further by another 25-50 bps to anchor inflation which continues to remain stubbornly high around 9.1% for May which will eventually hurt growth. Analysts expect GDP growth around 7.9% for FY12.
Dilip Bang in the Nirmal Bang monthly note said that markets may continue to remain range bound. The Nifty support was seen at around 5,450 and 5,379 levels; however resistance was seen at 5,560 and 5,625 levels. Bang recommends investors to avoid overnight positions due to international issues that could affect the Indian markets.
Asian markets also ended in the red. The Hang Seng Index declined 1.8%, Shanghai Composite Index lost 1.5% and The Nikkei Stock Average also declined 1.7%.
Markets across Europe were down following latest developments in Greece civil war in Athens continued as people went on strike to protest against latest austerity measures. Greek Prime Minister Papandreou made a statement that he would form a new government Thursday.
Back in India BSE IT index was leading the losses, down 1.5%. Patni Computer and TCS fell over 1%. Mphasis declined 4.3%.
BSE Healthcare index was the only sector which managed to stay in green. Lupin was up 1.9%, Sun Pharam advanced 0.7% and Cadila Health was up 0.6%.
The overall breadth was negative as 1,618 stocks declined while 1136 stocks which advanced.
