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The Sensex fell for a second consecutive session on Tuesday, as interest rate-sensitive stocks retreated after better-than-expected factory data and accelerating consumer inflation raised doubts about whether the Reserve Bank of India (RBI) would ease monetary policy this month.
January industrial production rose at a stronger-than-expected 2.4 per cent from a year earlier, expanding for the first time in three months, an early sign that Asia's third-largest economy may have turned a corner.
Meanwhile, annual consumer price inflation accelerated to 10.91 per cent in February from the previous month, government data showed. Traders said wholesale price-based inflation data due on Thursday would be crucial for cementing final views on monetary easing ahead of the RBI's policy review on March 19.
The Sensex closed down 0.41 per cent, or 81.29 points, at 19,564.92. The Nifty fell 0.48 per cent, or 28.25 points, to 5,914.10.
Stocks sensitive to interest rates fell after better-than-expected factory data and accelerating consumer inflation pared some of the rate cut hopes. ICICI Bank Ltd fell 0.8 per cent, while HDFC Bank Ltd was down 1.9 per cent.
Among auto makers, Bajaj Auto Ltd fell 1.5 per cent, while Hero MotoCorp Ltd ended 1.2 per cent lower. IT stocks fell for the second day on profit booking after last week's rally. Tata Consultancy Services fell 0.4 per cent, while Infosys ended 0.9 per cent lower. Tata Power Co Ltd fell 3.1 per cent after Credit Suisse downgraded the stock to 'underperform' from 'neutral' and cut its target price to Rs 83 from Rs 104.
The investment bank said Tata's power plant being built in Mundra should be operational in fiscal 2014, and that the company could post losses of Rs 1,500-1,600 crore per annum in the initial years.
However among stocks that gained, MMTC Ltd rose 7.2 per cent after the government postponed the planned sale of a 9.33 per cent stake in the state-run trading company due to valuation issues.
MMTC shares had earlier fallen as much as 5.7 per cent to a record low of Rs 280.05. The shares have slumped 53.5 per cent so far this year as of yesterday's close on worries that the share sale would come at a steep discount.
