The benchmark Sensex fell for the fifth day in a row and lost 56 points in lacklustre trade today as inflation picked up pace, strengthening chances of an interest rate hike by the Reserve Bank later this week.
Local indices dropped as Asian stocks declined ahead of the US Federal Reserve meeting starting tomorrow while investors assessed when tapering of the stimulus would start.
Heavyweight Reliance Industries and HDFC contributed the most to losses on the Sensex, while Infosys and ICICI Bank gave it support. Jindal Steel, Mahindra & Mahindra and Sun Pharmaceuticals were the biggest losers.
Oil & gas shares led four of the 12 BSE sectoral indices lower even as the IT index put up a strong showing after the rupee's recent weakness against the dollar.
Shares of GlaxoSmithKline Pharmaceuticals closed 18.6 per cent higher after UK-based GlaxoSmithKline Plc announced an open offer to increase its stake in its Indian subsidiary.
The S&P BSE Sensex opened little changed from Friday's close and traded in a range of 20,637.77 to 20,764.52. It ended at 20,659.52, down 56.06 points or 0.27 per cent. The index was at the lowest level since November 28.
The 50-share CNX Nifty on the National Stock Exchange fell 13.7 points, or 0.22 per cent, to 6,154. The SX40 on the MCX Stock Exchange closed 29.92 points lower at 12,285.28.
Wholesale price inflation climbed to a 14-month high of 7.52 per cent in November. Last week, the government said retail inflation soared to a nine-month high of 11.24 per cent and factory output shrank 1.8 per cent.
"WPI inflation rose more than expected...Firm underlying inflation pressures and sticky inflation expectations pose upside risks to inflation. Another rate hike from the RBI, therefore, seems to be in the cards," HSBC said in a note.
The RBI is scheduled to review the monetary policy on December 18. It hiked the key lending rate by 0.25 per cent in each of it two previous policy reviews to contain inflation.
"The RBI's interest rate decision and US Fed meeting outcome will be announced mid-week. The markets are expected to remain volatile," said Milan Bavishi, Head Research at Inventure Growth and Securities.
