High inflation dashes hopes of rate cut; Mkts down for 5th day

Market analysts said a slew of other factors such as Moody's downgrading three private banks and weak European cues also pulled down the Sensex which was trading nearly 100 points high in the morning trade. The sentiment was also weighed down by Finance Minister Pranab Mukherjee highlighting that food inflation has reached double digits.

The Sensex, which was trading higher at 16,390.33 points, started moving down after inflation rose to 7.S23 per cent in April. Food inflation rose to 10.49 per cent. The index finally closed down at 16,215.84, its lowest level in 4 months. Investors were poorer by Rs 28,000 crore today.

Mukherjee said: "Food inflation is a matter of concern, particularly it has reached the double digit." Markets now see little chances of interest rates coming down anytime soon.

The RBI will have to take this higher number into account as it tries to support the growth rate through any future rate cuts, Dipen Shah, Head of Fundamental Research, Kotak Securities.

Three private sector banks - ICICI, HDFC and Axis - bore the brunt of investor wrath after rating agency Moody's downgraded them. Blue-chips HDFC bank and ICICI bank lost nearly 2 per cent while Axis Bank lost around 0.70 per cent.

However, the biggest losers in Sensex were DLF (2.64 per cent), Tata Motors (2.42 per cent) and RIL (2.32 per cent).

Interest-rate sensitive sectors banking and realty closed with over 1.5 per cent losses.

"Despite a relatively strong base effect, the Wholesale Price Index (WPI) edged up...Higher than ours and consensus expectations," said Rohini Malkani, Economist, Citi India.

The NSE today also witnessed a technical glitch in the derivatives segment this afternoon with the value of Nifty and other indices not getting updated but the issue got resolved later. The Nifty dropped by 21.10 or 0.43 per cent to end at 4,907.80. Ent. (MORE)