Sensex falls 126 pts to two-week low inflation data awaited

The Sensex fell for a fifth session today, with ITC slumping as index provider FTSE lowered its free-float weighting and Hindustan Unilever extending falls on concerns it might have to pay higher royalty to parent Unilever Plc.

Foreign portfolio inflows touched $21.42 billion this year, helped by optimism over reform measures. But equities have started looking overbought to market participants, a concern underscored by the Nifty closing below the 5,900 level for the third day.

Profit-booking was higher as investors awaited the outcome of inflation numbers on Friday, which will set the tone for the central bank’s policy meeting on December 18.

Wholesale prices likely rose 7.6 per cent in November from a year earlier, compared with 7.45 per cent in October, a Reuters poll showed.

"Inflation is really important tomorrow as it may set the pace for a CRR cut at least in December, but rate cut would happen only in January," said Sandeep J Shah, CEO, Sampriti Capital. Consumer inflation numbers have already risen, and wholesale price index cannot be looked at in isolation, added Shah.

The Sensex fell 0.65 per cent, or 126 points, to end at 19,229.26, its lowest close in two weeks. The Nifty fell 0.62 per cent, or 36.50 points, to end at 5,851.50, closing below the psychologically important 5,900 level for the third day.

Index heavyweight ITC fell 3.5 per cent after FTSE lowered its free-float weighting for the cigarette maker in its global equity index series, according to the website of the index provider.

Hindustan Unilever fell 1.9 per cent on Thursday, down for the second day, on concerns that it may face higher royalty payments to its parent Unilever PLC. Cement maker ACC fell 1.8 per cent after the board approved payment of technology and knowhow fees to its parent Holcim Limited.

However, among stocks that gained, Tata Motors rose 4.1 per cent, ahead of Jaguar Land Rover unit's wholesale volume numbers.

Shares in non-banking finance companies gained after the Reserve Bank of India unveiled draft capital guidelines for the sector that are seen less stringent than feared earlier. Mahindra and Mahindra Financial Services rose 1.2 per cent, while LIC Housing Finance ended 0.3 per cent higher.