Sensex down 363 points as rate hike fear hits banks

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Falling for the second day, the Bombay Stock Exchange (BSE) benchmark Sensex Monday ended about 363 points lower at 19,900.96 as investors continued to unwind positions in banking, realty and capital goods stocks on heightened fears that the Reserve Bank of India (RBI) will hike repo rates further to curb inflation.

After losing 383 points in the previous session as RBI unexpectedly hiked repo rate by 0.25 percentage points, the 30-share Sensex lost another 362.75 points, or 1.79 per cent, to end at 19,900.96.

Among Sensex components, 22 stocks declined led by SBI, ICICI Bank, HDFC Bank, ITC, Jindal Steel, L&T, Maruti Suzuki, ONGC, Sun Pharma, RIL, Tata Motors, Tata Power and Tata Steel.

The market sentiment was also tepid ahead of the expiry of monthly derivative contracts on Thursday, traders said.

Similarly, the National Stock Exchange index Nifty dropped by 122.35 points, or 2.04 per cent, to close at 5,889.79, after touching the day’s low of 5,871.40. It had lost 103.45 points in the previous session.

The BSE Banking sector index suffered the most as it lost 4.41 per cent, followed by Realty (4.33 per cent), Capital Goods (3.28 per cent), PSU (2.56 per cent) and Power (2.26 per cent). Bucking the general weakening trend, stocks in Information Technologies and Consumer Durable sectors gained on heavy buying.

Infosys, Wipro and TCS shares rose amid the rupee showing weakening trend. It was last trading at 62.6 levels versus the US dollar.

Having been surprised by the repo rate increase on inflation concern, analysts from Standard Chartered, Credit Suisse and Nomura expect new RBI governor Raghuram Rajan to hike repo rate by another 0.50 percentage points this fiscal.

“We now expect RBI to increase repo rate by 0.25 per cent each at the next two policy meetings to eight per cent by end of 2013,” Standard Chartered said in a report.

Absence of clear direction from overseas markets with Japan and Hong Kong markets being closed for a public holiday, and mixed trend in Europe also forced funds to reduce their positions in India, brokers said.

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