Sensex down 148 pts on rate jitters

The stock market plummeted on Monday amid fears of a rate hike in the Reserve Bank of India's forthcoming monetary policy.

Sustained selling by foreign funds and unwinding of positions ahead of the expiry in the derivatives segment later this week also added to the pressure, dealers said.

On Friday, when the Sensex had gained 134 points snapping a three-day losing spree, foreign institutional investors (FIIs) pulled out Rs 404 crore from the cash segment. This month till date, FIIs' net sales amounted to Rs 1,866 crore.

The market barometer, Sensex, lost 1.84 per cent, or 148 points, to close at 7,920.80 after hitting the day's high of 8,126.27.

Interestingly, the market breadth was positive with 1,337 shares advancing, while 1,094 shares slipped. While 256 stocks hit the upper end of the circuit, 250 were locked at the lower end of the circuit. More than half of the trades executed on the BSE were for delivery.

With growth in corporate earnings tapering off after a good run of two years, analysts said higher interest rates would add to cost pressures and adversely impact corporate profitability apart from impacting sales through lower consumer spending.

Besides, rising rates could also slow loan growth and affect treasury profits of banks.

In Monday's trading, most bank stocks ended weak. The BSE banking index was down 1.85 per cent. The three banks, which constitute nearly 15 per cent of the Sensex, also ended 2 per cent lower. The State Bank of India fell 2.6 per cent to Rs 863.75, ICICI Bank was down 1.8 per cent at Rs 497.9 and HDFC Bank slumped 1.8 per cent to Rs 635.45.

The biggest sectoral loser was BSE Healthcare index which lost over 3 per cent weighed down by domestic pharma majors Ranbaxy, Biocon and Sun Pharma which lost over 7 per cent.

Auto shares remained strong. Tata Motors, which is scheduled to announce its second quarter results tomorrow, rose 1 per cent to Rs 5,17.5. Maruti gained gained 2.7 per cent to Rs 572.45, while Bajaj Auto climbed 3.4 per cent to Rs 1,798.45. Reliance Capital fell 4.7 per cent despite announcing good quarterly numbers.