Rate rise fears cut short 3-day market rally

Hectic selling in financial and realty stocks ahead of the Reserve Bank of India’s (RBI's) monetary policy review halted the three-day winning streak of the Sensex.

The 30-share Bombay Stock Exchange benchmark, Sensex, settled 151.42 points, or 0.76 per cent, lower at 19,647.77. The National Stock Exchange's Nifty, too, came under pressure and ended at 5,892.30, down 51.80 points.

Interest rate-sensitive banking and realty stocks got a severe drubbing ahead of RBI’s mid-quarter monetary policy review tomorrow, as investors speculated the apex bank will signal a rise in rates to anchor inflationary expectations. Marketmen also attributed the decline to profit-booking by wary investors after a three-day rally.

“The fall in the broader market is mainly because of heavy profit-booking across the board, coupled with weak global market trend,” said Alex Matthews,head, Geojit BNP Paribas Research.

Trading sentiment was also influenced by a steep fall in the Asian region and lower opening in Europe after Moody’s rating agency placed Spain on review for a possible down grade, sparking fresh worries over the euro zone debt crisis.

The market shrugged off higher advance tax figures by some key corporates for the third installment and a strong listing of state-run MOIL.

Top lenders ICICI Bank, HDFC Bank and the State Bank of India were major losers. ICICI lost 3.65 per cent, HDFC Bank fell 3.34 per cent, while state-run lender SBI declined 3.46 per cent. Led by fall in the three big stocks, the BSE banking index shed 417.51 points, or 3.18 per cent, to close at 12,722.65.

“Dearth of buying mainly in banking stocks led to the fall. Besides, weak global markets spoiled the mood,” SMC Capitals Equity Head Jagannadham Thunuguntla said.