Sensex falls for second day; RBI rate cut bets diminish

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE 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 RBI would ease monetary policy this month.

January industrial production rose at a stronger-than-expected 2.4 percent 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 percent 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.

 

"Market is waiting for WPI numbers and will take direction after RBI meet," said Vaibhav Sanghavi, director at Ambit Capital.

The Sensex closed down 0.41 percent, or 81.29 points, at 19,564.92.

The Nifty fell 0.48 percent, 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 percent, while HDFC Bank Ltd was down 1.9 percent.

Among auto makers, Bajaj Auto Ltd fell 1.5 percent, while Hero MotoCorp Ltd ended 1.2 percent lower.

IT stocks fell for the second day on profit booking after last week's rally.

Tata Consultancy Services fell 0.4 percent while Infosys ended 0.9 percent lower.

Tata Power Co Ltd fell 3.1 percent after Credit Suisse downgraded the stock to "underperform" from "neutral" and cut its target price to 83 rupees from 104 rupees.

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 15-16 billion rupees per annum in the initial years.

However among stocks that gained, MMTC Ltd rose 7.2 percent after the government postponed the planned sale of a 9.33 percent stake in the state-run trading company due to valuation issues.

MMTC shares had earlier fallen as much as 5.7 percent to a record low of 280.05 rupees. The shares have slumped 53.5 percent so far this year as of Monday's close on worries that the share sale would come at a steep discount.

Shares in Reliance Industries Ltd gained 0.4 percent, on expectations of additional inflows as both stocks could see an increase in their weightage in FTSE indexes after a rebalancing last week, according to Citigroup estimates.

FTSE last week announced a quarterly rebalancing across its indexes with changes due to take effect after the close of markets on Friday.

(Additional reporting by Manoj Dharra; Editing by Subhranshu Sahu)