Markets dip led by rate sensitives

Key benchmark indices lose 1% each

Benchmark share indices ended lower on Friday dragged by rate-sensitive shares as hopes of a rate cut remained elusive after better-than-expected Apr-Jun GDP data. Selling pressure in index heavyweight Reliance Industries also dampened sentiment. The Sensex lost 161points at 17,381 after touching an intra-day low of 17,337 and the Nifty declined 57points to 5,258 after touching a low of 5,239 so far.

In the broader markets, the midcap and the smallcap indices closed flat with a positive bias outperforming the Sensex which lost nearly 1%.

India's economy grew at a higher-than-expected 5.5% in the quarter ending in June, against analysts' forecasts of 5.3%, government data showed on Friday.

The manufacturing sector grew an annual 0.2% during the quarter, while farm output rose 2.9%, the data showed. In the quarter ending in March, economic growth was at 5.3%.

On the global front, Japan's Nikkei average fell to a four-week closing low on Friday as resources-related shares remained under pressure on concern over slowing China growth, while Sharp Corp sank on uncertainty over a tie-up with Taiwan's Hon Hai Precision Industry. The Nikkei ended down 1% while the Hang Seng and Shanghai Composite were down 0.3% each.

European shares ticked up in choppy trade on Friday as investors braced for a speech by U.S. Federal Reserve Chairman Ben Bernanke that could offer clues on the central bank's next policy steps. The CAC-40, DAX and FTSE-100  gained between 0.3-0.6% each.

All sectoral indices on the BSE closed in the negative terrain with Metal index down over 1.4% followed by Power, Oil&Gas, Realty, Auto and IT indices down between 1.1-1.3% each.

Index heavyweight Reliance Industries was down 2.1% at Rs 765. Citigroup has downgraded Reliance Industries to "neutral" from "buy", but raises its target price to 847 rupees from 818 rupees.

ICICI Bank was down 1.7% on profit taking. Meanwhile, Nomura has upgraded ICICI Bank to "buy" from "neutral" saying the Indian lender was "better shielded from the asset quality deterioration" in the banking sector, and expects return on equity to increase by 15 percent by fiscal 2013.

FMCG shares which had gained in the previous few sessions also witnessed profit taking. Hindustan Unilever was down 2% while ITC slipped 1%.

Software exporters were down ahead of US Fed Chairman Ben Bernanke's address to the annual Jackson Hole meeting of central bankers later today. TCS was down 1.7% while Infosys and Wipro slipped 1-2% each. These software firms earn most of their revenues from exports to the US.

Auto shares witnessed profit taking on concerns that August sales growth would continue to remain subdued and demand would further slowdown on account of high interest rates on auto loans and rising fuel prices. Tata Motors, Maruti suzuki, Bajaj Auto, Hero MotoCorp and Mahindra & Mahindra were down between 1-2% each.

Capital goods shares also witnessed selling pressure as manufacturing segment witnessed dismal growth during the Apr-Jun quarter. During the quarter ended June 30, the manufacturing sector grew marginally by 0.2%, against 7.3% growth in the same period of 2011-12, according to the official data released today. BHEL was down 2% while L&T slipped 1%.

Metal shares were down on concerns of that demand would slowdown after China's factory output rose to its slowest rate in eight months in July. China is the world's largest metal consumer. Sterlite, Tata Steel, Hindalco were down 1-2% each.

Among other stocks, GMR Infrastructure dipped 4.7% to Rs 18.25, recovering from its record low of Rs 17.60 on back of heavy volumes on the Bombay Stock Exchange.  A combined 13.03 million shares have changed hands on the counter so far against an average 8.5 million shares that were traded daily in past two weeks on both the exchanges.

Industrial finance Corporation of India (IFCI) dipped 4% to Rs 26.10. The stock tanked 26% in past six trading sessions from Rs 34.95 after the government approved conversion of Rs 923 crore debentures held by it in the company into equity, which will increase its stake in the financial institution to 55.57%.

The market breadth was weak with 1,423 losers and 1,381 gainers on the BSE.