Sensex, Nifty end 1% lower; ITC falls 5%

Weak monsoon forecast rekindled fears of higher inflation dimming prospects of further rate cuts

Markets have closed lower for second straight session weighed down by ITC and bank shares.

Provisionally, the 30-share Sensex closed down 351.18 points at 26,837.20 and the 50-share Nifty was down 101.35 points at 8,135.10.


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Updated at 14:12

Markets continued to witness selling pressure in noon trades on Wednesday as weak monsoon forecast rekindled fears of higher inflation thereby dimming the prospects of further rate cuts by the central bank. Further, the slow pace of recovery in the economy continued to weigh on market sentiment.  

At 14:12PM, the 30-share Sensex was down 406 points at 26,782 and the 50-share Nifty was down 117 points at 8,119.

The India Meteorological Department on Tuesday downgraded monsoon forecast to 88% of the long-term average as against the earlier forecast of 93%, raising fears of a drought.

The RBI at its monetary policy review on Tuesday cut the economic growth estimates for 2015-16 to 7.6 per cent from guidance of 7.8 per cent given in April 2015. The central bank also highlighted uptick in global crude oil prices amid geopolitical concerns.

Further, foreign portfolio investors sold shares worth a net Rs 594.14 crore on Tuesday, as per provisional data.

Meanwhile, the Indian rupee weakened further against the US dollar and was down at Rs 63.96 against the previous close of Rs 63.82.

SECTORS & STOCKS

Except for IT all other sectoral indices were in the red. BSE Realty index was the top sectoral loser down over 8% followed by FMCG Index which eased nearly 4%. Other losers include Healthcare, Consumer Durables and Power.

FMCG shares weakened on concerns that weak monsoons would impact the rural economy leading to lower volume growth. Hindustan Unilever was down 2%.  

ITC extended losses and was down 5% after the FMCG major was quoted ex-dividend today. The board had proposed a dividend of Rs 6.25 per share for the year ended 31 March 2015.

Rate sensitive stocks continued to witness selling pressure after the cautious stance by the RBI which indicated that the further rate cuts could be delayed.

In the banking space, ICICI Bank, Axis Bank and SBI were down 2-3% each. State Bank of India (SBI) reduced its base rate or minimum lending rate to 9.70% from 9.85% effective June 8. This is the second rate cut by SBI in about two months.

Tata Motors was the top loser in the auto segment down over 4% followed by Maruti suzuki, M&M, Bajaj Auto and Hero MotoCorp.

Realty shares witnessed a sell-off on concerns of rising inventory levels while high debt levels of some companies also weighed on the sector. In the realty segment, Unitech was down 41%, while HDIL, Indiabulls Real Estate, Anant Raj Industries, Oberoi Realty and DLF were down 5-12% each.

BHEL was down 2.5%. The PSU engineering major secured the largest order in its history for setting up a 4,000 megawatt (5x800 Mw) super-critical thermal power project from Telangana State Power Generation Corporation (TSGENCO). The order is valued at Rs 17,950 crore.

Among others, Nestle continues to witness a sell-off and slumped 10% after the Delhi Government summoned officials of Nestle India claiming that the samples of Maggi noodles fail to conform to food safety norms and are unsafe.

In the broader market, the BSE Mid-cap index was down 2.2% and the Small-cap index was down 3%.

Market breadth weakened further with 2,092 losers and 414 gainers on the BSE.