Market down 1% on rate hike fears

Markets continued to trade weak led by financials on rate hike fears amid high inflation

Benchmark share indices were trading nearly 1% down in noon trades on Friday with rate sensitive shares led by financials among the top losers on fears of rate hike by the central bank next week after consumer price inflation in November remained in double digits.

At 1:10PM, the 30-share Sensex was down 0.9% or 196 points at 20,729 and the 50-share Nifty was down 62 points at 6,175

The Index of Industrial Production (IIP), industrial growth in October 2013 reported contraction of 1.8% as compared to growth of 2.0% in the previous month and 8.4% in October 2012. The industrial production for October 2013 surprised negatively by coming in lower than market expectations of a 1.2% decline.

The retail price index-based inflation jumped to an all-time high of 11.24% in November, driven by high vegetable prices, official data showed today. The inflation stood at 10.09% in October, entering double digits for the first time  in six months.

The Indian rupee fell and bonds yields surged on Friday after retail inflation spiked, raising bets of a rate hike at the RBI's policy meeting next week.

The rupee was trading at 62.14 to a dollar compared to its Thursday close of 61.81/82.

Asian markets were trading flat as investors remained cautious ahead of the US Fed's stance at its two-day meet next week. Shares in Japan firmed up after the yen weakened against the dollar. The benchmark Nikkei ended up 0.4% while Shanghai Composite was down 0.3%. Hang Seng and Straits Times were trading flat with marginal gains.

BSE Bankex and Capital Goods indices were the top loser among the sectoral indices on the BSE down nearly 2% followed by Realty, Power, Consumer Durables, Oil and Gas, Metal and Auto shares.

Bank shares were down on fears that the RBI might hike rates next week on the back of high consumer price inflation in November. ICICI Bank, HDFC Bank, SBI were down 0.5-3.6% each.

Capital goods shares lost ground after weaker-than-expected industrial production in October. L&T was down 1.7% and BHEL slipped 3.8%.

Auto stocks were also among the top Sensex losers on concerns that high interest rate on vehicle loans could result in slowdown in sales growth going forward. Bajaj Auto, Hero MotoCorp, Maruti Suzuki was down 2-2.6% each.

Other Sensex losers include, Reliance Industries was down 0.5% and TCS dipped 1%.

In the broader market, the BSE Mid-cap index was down 0.9% and the Small-cap index was down 0.5%.

Market breadth remained weak with 1,379 losers and 737 gainers on the BSE.