Markets extend losses led by rate-sensitive shares

Benchmark indices have extended the losses as higher-than-expected Feb retail inflation numbers dashed hopes that the central bank would pause interest rate hikes. Rate sensitive sectors are witnessing selling pressure.

By 13:30, the 30-share Sensex was down 106 points at 19,539 and the 50-share Nifty was down 37 points at 5,906. The Sensex and the Nifty reached an intra-day low of 19,506 levels and 5,894 mark, respectively.

Retail inflation moved up for the fifth consecutive month to 10.91% in February -- remaining in the double-digit terrain for third month in a row -- on account of higher prices of vegetables, edible oil, cereals and protein-based items. It was 10.79% in January. The inflation crossed doubled digit mark in December at 10.56%, against 9.90% in November.

Ranak Merchant, Technical Analyst - Strategies, Sushil Financial Services says, “Last week saw Indices make a smart comeback from just above their 200 Day EMA from a Double Bottom Support near 5850. Yesterday's high of 5971 not only marked a 61.80% Fibonacci Retracement cross over of the fall but also a test of a previous weekly double top. Pre RBI Policy Benchmark indices are expected to consolidate around these levels. 5879 is an important support that needs to be held onto on closing basis.”

On the sectoral front, BSE Consumer Durable index has declined by almost 2% followed by counters like Realty, Power, Banks, Metal, IT and Capital Goods, all falling down by 1% each.

From the Consumer Durable space, Blue Star, Titan Industries and Bajaj Electricals have slipped between 2-5%.

Interest rate sensitive counters like Banks and Realty are witnessing selling pressure as higher-than-expected Feb retail inflation numbers dashed hopes that the central bank would pause interest rate hikes.

Adds Ranak Merchant, Technical Analyst - Strategies, Sushil Financial Services, “The rate sensitives are giving mixed signals pre policy, and therefore individual stock breakouts need to be eyed. Eg. SBI finds continuous resistance near its 200 day EMA and therefore only a close above 2225 can confirm a tradable bounce.”

Banking and financial shares like HDFC Bank, SBI, ICICI Bank and HDFC have fallen between 1-2%.

Realty shares like Unitech, Prestige Estates, Indiabulls Real Est, HDIL and Anant Raj Inds have declined between 2-4%.

Capital Goods majors like BHEL and L&T have slipped between 0.3-1%. The capital goods sector contracted by 1.8%, against its contraction of 0.9% in December 2012.

Tata Power is the top Sensex loser, down nearly 3%. Credit Suisse downgrades Tata Power Co Ltd to "underperform" from "neutral" and cuts its target price to Rs 83 from Rs 104.

Other notable losers are Bharti Airtel, Hindalco, Sterlite, Bajaj Auto, Tata Steel and Hero Moto.

Shares in Reliance Industries have gained 0.9%, while Oil and Natural Gas Corp Ltd is up 0.4% 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.

Among others shares, MMTC has rallied 8% to Rs 319, bouncing back almost 14% from intra-day low, on reports that the empowered Group of Ministers (eGoM) has deferred the decision on share sale.

The market breadth in BSE remains weak with 1,643 shares declining and 1,001 shares advancing.